Economic Concepts and Markets Flashcards

The 'velocity of money' refers to:

Answer: The frequency with which a unit of currency is used to purchase goods and services in a given period

The velocity of money measures how quickly money circulates through the economy, calculated as nominal GDP divided by the money supply.

Which type of unemployment is associated with workers transitioning between jobs or entering the labor market?

Answer: Frictional unemployment

Frictional unemployment occurs when workers are temporarily between jobs or searching for new employment, and is considered a normal and inevitable part of a healthy labor market.

When a central bank engages in 'quantitative easing,' it is primarily:

Answer: Purchasing large quantities of financial assets to inject liquidity into the economy

Quantitative easing involves a central bank purchasing financial assets such as government bonds and mortgage-backed securities to increase money supply and lower long-term interest rates.

The Phillips Curve originally described an inverse relationship between:

Answer: Unemployment and inflation

The original Phillips Curve showed an empirical inverse relationship between the unemployment rate and the inflation rate, suggesting that lower unemployment tends to be associated with higher inflation.

Which of the following would most likely cause the U.S. dollar to appreciate against foreign currencies?

Answer: A rise in U.S. interest rates relative to other countries

Higher U.S. interest rates attract foreign capital seeking better returns, increasing demand for dollars and causing the dollar to appreciate relative to other currencies.

A 'recession' is formally defined by the National Bureau of Economic Research (NBER) as:

Answer: A significant decline in economic activity spread across the economy lasting more than a few months

The NBER defines a recession as a significant decline in economic activity that is spread across the economy and lasts more than a few months, considering factors beyond just GDP.

In the context of supply and demand, a price ceiling set below the market equilibrium price will most likely result in:

Answer: A shortage of the good

A price ceiling below equilibrium keeps prices artificially low, which increases quantity demanded while reducing quantity supplied, creating a shortage.