AFK Economic Concepts and Markets 3

Question 1

The 'velocity of money' refers to:

Accepted Answer

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

Answer

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

Question 2

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

Accepted Answer

Frictional unemployment

Answer

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.

Question 3

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

Accepted Answer

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

Answer

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.

Question 4

The Phillips Curve originally described an inverse relationship between:

Accepted Answer

Unemployment and inflation

Answer

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.

Question 5

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

Accepted Answer

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

Answer

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.

AFK - Assessment of Fundamental Knowledge Practice Test

AFK - Assessment of Fundamental Knowledge Practice Test

AFK Economic Concepts and Markets 3