1. Economics Review for Test

2. Be able to define the following terms: Surplus Shortage Inflation Deflation Recession Depression Fiscal Monetary Trade Deficit Unemployment

3. Answer the following questions 1.What determines the strength of the U.S.? 2.What is indicated by an increase in production? 3.What actions can the gov’t take to lead the country out of a depression? 4.What types of farmers DO NOT get subsidies? 5.Who regulates interest rates of banks? 6.How do Americans feel about subsidies? 7.What can be done with imports and exports to increase a country’s standard of living? 8.How do people manage their money during an inflation? 9.What happens to consumer spending when interest rates increase?

4. 1.List the three policies utilized by the U.S. to impact the economy. 2.What do economists use to measure the economy? 3.Which policy is the gov’t using when it utilizes its spending and taxing power? 4.Which policy is the gov’t using when it acts on the exchange of goods and services between nations? 5.During what period in the business cycle do people usually use credit to purchase goods and services they can no longer afford?

5. 1.What do lower interest rates usually lead to? 2.What is trade policy used to increase? 3.What makes up the Federal Reserve System? 4.What does the FED intend to happen when they lower the discount rate? 5.What is the result of lowering taxes and raising gov’t spending? 6.What are some of the causes of inflation? 7.Know the points on a business cycle. 8.With whom does the FED directly conduct business?

6. 1.What is usually accomplished by specialization of a nation? 2.What can the FED do to encourage spending? 3.Which federal institution is primarily responsible for controlling the money supply? 4.What actions can the gov’t take to get the economy out of a depression?

7. Essay Question (20 Points) Explain the concepts of inflation and deflation. How does each extreme impact the economy? What can the U.S. government do to avoid either extreme?