Exam 2: Economics and Banking

What is an economic indicator?

In what way does monopolistic competition favor consumers?

Celeste is interested in studying the effects that natural disasters have on the value of goods and services in the affected areas. Her area of study should be ________.

What are substitute goods?

Although the United States comes close to being a capitalist economy, it is considered a mixed economy because there is some government intervention.

The term "business cycle" refers to ________.

According to the law of supply, the amount of a good or service supplied will increase as the price increases, and decrease as the price decreases. This direct relationship exists because ________.

Business managers do not need to be aware of the decisions of collective businesses outside their own industry.

The gross national product (GNP)measures ________.

What does the monthly consumer price index (CPI)measure?

Taken together, iPod and iTunes are ________.

How does lowering the discount rate enable the Fed to stimulate the economy? How does raising the discount rate enable the Fed to control too robust an economy?

The discount rate is the interest rate banks are charged when they borrow money from the Fed.

When the Federal Reserve Bank buys or sells U.S. securities, it changes the level of reserves in the banking system, which has an effect on interest rates.

What does the consumer price index (CPI)tell us about the purchasing power of the dollar? How does it function as an economic indicator?

Population changes are a key determinant of demand for goods and services.

Competition affects demand by changing the number of substitute goods in a given market.

A recession is a decline in the gross national product (GNP)over two or more consecutive quarters of the year.

________ unemployment measures unemployment caused by lack of demand for those who want to work; it generally follows the economy.

One example of complementary goods is ________.