Exam 2: Economics and Banking

The law of demand states that as the price for an item or service increases, so will the supply and that if the price is lower, the supply will also be less.

The gross domestic product (GDP)measures ________.

The price of a product or service is based entirely on its actual value.

The Federal Reserve System (the Fed)manages the country's money supply through its monetary policy to control inflation by doing all of the following EXCEPT ________.

In which part of the business cycle is the Federal Reserve most likely to increase the discount rate to discourage banks from borrowing?

John is an employee at a car manufacturer. Today he has come into work to find that production has stopped because the government has determined that the steel used in the cars will be better used in the manufacture of a new railway line. John doesn't mind, because although his wages are low, he gets paid whether there is any work for him to do or not. John MOST likely lives in a ________.

Which of the following industries is LEAST likely to form an oligopoly?

ArmiLiza, a popular United States-based brand of handbags, has built a second factory in Mexico. The majority of the new factory's employees are Mexican citizens or Honduran immigrants. On which country's gross domestic product will the second factory's goods be counted?

________ unemployment measures permanent unemployment associated with massive industry-wide changes that lead to complete elimination of the positions formerly held.

The average total of goods and services required to maintain a particular standard of living is called ________.

Describe how each of the four degrees of competition affect supply and demand.

The government allows ________ companies to operate as regulated monopolies.

The value of the CPI's "market basket" is determined by ________.

A(n)________ occurs when there are many buyers and sellers and little differentiation between products, but perceived differences between products among consumers.

Decreasing taxes can stimulate the economy by ________.

Define open market operations and describe how the Federal Reserve Bank uses them to control the money supply.

Traditional economies are the most common economies found in the world today.

The amount of a product or service that is available for purchase at any given time is called ________.

All of the following statements about open market operations are true EXCEPT ________.

________ is a decrease in the rate of inflation.