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ECO 202 Exam – Questions With Verified Solutions
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ECO 202 Exam – Questions With Verified Solutions
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ECO 202 Exam – Questions With Verified SolutionsFederal Reserve System Right Ans - Central bank with roles in banking,
regulation, and monetary policy
Open Market Operations Right Ans - Buying or selling financial assets to
adjust money supply
Money Creation Process Right Ans - Process where banks create money
through lending
Money Multiplier Right Ans - Ratio of money supply change to monetary
base change
Inflation Goal Right Ans - Fed's target of 2% inflation to keep prices stable
Full Employment Right Ans - Maintaining a low unemployment rate
Dual Mandate Right Ans - Fed's goals of low inflation and full employment
Board of Governors Right Ans - Top governing body of the Federal Reserve
System
Regional Federal Reserve Banks Right Ans - 12 banks providing services to
local institutions
FOMC Right Ans - Federal Open Market Committee regulating money
supply
Open Market Purchase Right Ans - Fed buying assets to increase money
supply
Open Market Sale Right Ans - Fed selling assets to decrease money supply
Monetary Base Right Ans - Sum of currency and bank reserves with the Fed
,Money Multiplier Formula Right Ans - Money multiplier = Change in
Quantity of Money / Change in Monetary Base
Example Scenario Right Ans - Illustration of money multiplier calculation
after an open market purchase
Macroeconomics Right Ans - Study of the national economy's performance
Business Cycle Right Ans - Fluctuations in real GDP with expansion and
recession phases
Recessions Right Ans - Phases of persistent production decline
Expansions Right Ans - Phases of persistent production increase
Inflation Right Ans - Overall price level increases
Deflation Right Ans - Overall price level decreases
Nominal GDP Right Ans - Market value of all final goods and services
produced in a country
Market Value Right Ans - Price at which a good or service is sold
Final Goods and Services Right Ans - Goods purchased by their final user
Intermediate Goods and Services Right Ans - Items used as components in
final goods or services
Expenditure Approach Right Ans - Measures total expenditures on final
goods and services
Income Approach Right Ans - Measures total income received by factors of
production
Personal Consumption Expenditures (C) Right Ans - Spending by domestic
households on consumer goods
, Gross Private Domestic Investment (I) Right Ans - Spending by domestic
firms on new capital goods
Capital Goods Right Ans - Goods used to produce other goods and services
Additions to Inventories Right Ans - Goods produced but not sold within
the measured period
Government Expenditure on Goods and Services (G) Right Ans - Purchases
by federal, state, and local governments
Transfer Payments Right Ans - Cash transfers from governments to
households and firms
Net Exports of Goods and Services (X-M) Right Ans - Value of exports
minus imports
Trade Deficit Right Ans - Negative value of net exports
Trade Surplus Right Ans - Positive value of net exports
Stock of Capital Goods Right Ans - Total amount of capital goods in the
economy
Reported GDP increases when, in fact, total production is unchanged when:
i. there is a shift from household production to market production.
ii. a previously illegal activity is legalized. Right Ans - Both i and ii
An economic expansion rather than a recession occurs Right Ans - when
growth in real GDP is positive.
Suppose the country of Dingo experienced a business cycle peak in January
2022. We can conclude that: Right Ans - a recession occurred after January
2022.
If deflation is occurring, the price level in an economy is: Right Ans - falling
In a period of rapid, unexpected inflation, resources can be lost Right Ans -
hen firms use resources to forecast inflation.
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