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Economic Review Questions

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1. Define the term microeconomics.

2. Define the term macroeconomics.

3. Define the abbreviation SEC and define what it does.

4. Define the abbreviation FDIC and define what it does.

5. Define the term laissez-faire in terms of economics.

6. Define GDP and explain what it is.

7. Define inflation.

8. Define the scarce means of production and explain why they are scarce.

9. Explain how one can increase production potential.

10. Explain why the Social Security tax be considered a regressive tax.

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1. Microeconomics is that branch of economics which deals with the allocation of scarce resources. This is done in free markets by prices, which are determined by supply and demand.

2. Macroeconomics is based on microeconomics. It uses price theory to determine how the economy will behavior in different circumstances. It makes predictions about national income, unemployment, and inflation.

3. The Securities and Exchange Commission oversees financial markets. It requires that those selling investments are honest about the risk involved. It requires that companies divulge financial information, thus enabling prices to be determined by information which is known to all participants. This allows for efficient markets.

4. The Federal Deposit ...

$2.19
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What is the impact of a trade deficit on the exchange rate value of the dollar? Address the economic motivations underlying international trade. Provide an actual (real-world) example that could be used to demonstrate the price inelasticity of demand for a given good.

D Q week 5
1. What is the impact of a trade deficit on the exchange rate value of the dollar? Make sure you explain how transactions in the foreign exchange market (as a result of the trade deficit) result in price pressures placed on this change exchange rate.

2. Address the economic motivations underlying international trade. Under what circumstances would two countries have no incentives to trade?

3. Provide an actual (real-world) example that could be used to demonstrate the price inelasticity of demand for a given good. Be sure to provide a quantitative definition of price inelastic demand as well as support for the real-world example you provide.

4. What is the purpose of anti-trust legislation? In your answer, be sure to include explicit benefits that can be realized by consumers as a consequence of the enforcement of this legislation. What are some potential costs (to consumers)?

5. Explain the Keynesian perspective with respect to deficit spending by the federal government.

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7. Why does the Monetarist school of economic thought maintain that monetary stimulus is doomed to be ineffective in the long run?

8. Identify and explain significant aspects associated with the task of measuring unemployment. What people are not counted as being unemployed in the U.S. economy? Note: Do not merely describe how the unemployment rate is calculated; instead, make sure you explain the problems associated with measuring the unemployment rate.

9. A country operates under a flexible exchange rate system and is experiencing a deficit in its Current (trade) Account. Ignoring all other Balance of Payments categories, what should be the net effect of the trade deficit on the country's Capital Account? Explain.

10. Explain why, at one point in time, a Keynesian approach to managing the macro-economy might be appropriate while, at another point in time, a Classical approach might be more likely to produce a superior outcome. Make sure the outcome you address includes inflation and employment issues.
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What are the advantages and limitations of International Trade
b. What are the effects on international trade on the U.S. economy?
c. Explain how changes in fiscal and monetary policies affect exchange rate.

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