ECN 211 Final Hill ASU 70 Questions with Complete Solutions
- problems with borrowing - Correct Answer risk and foolishness
invest for 2 reasons - Correct Answer return is high, cost of borrowing is low When should the government borrow and save? - Correct Answer borrow in bad times, save in good times risk - Correct Answer borrowing to invest, does not pay off the way it was expected foolishness - Correct Answer people with lots of credit are often riskier and make bad decisions what happens when a market loses faith in the country? - Correct Answer country has to pay high interest rates or can't borrow what is the main factor in whether countries have debt crisis's? - Correct Answer if they borrow in their own currency Death Spiral - Correct Answer Paying high interest rates would increase the amount it needs to pay off and they would have to borrow even more Why is it unlikely that the US will have a debt crisis? - Correct Answer better demographics, large tax base, and a healthy economy What is necessary to keep a country from having a debt crisis? - Correct Answer nominal GDP needs to grow at a faster rate than debt Who holds the most US debt? - Correct Answer Social Security 1 / 2
What are interest rates controlled by? - Correct Answer The swing of demand, NOT the Fed Characteristics of good money - Correct Answer divisible portable unit of account durable resistant to counterfeit legal tender is it better to have more inflation or deflation? - Correct Answer inflation because deflation is associated with economic depression network externality - Correct Answer a situation in which the usefulness of a product increases with the number of consumers who use it reason why there were benefits to the gold standard fixed exchange rate - Correct Answer An exchange rate policy under which a government commits itself to keep its currency at or around a specific value in terms of another currency or a commodity, such as gold.When did the US go off the gold standard? - Correct Answer the 1930s, up until the Great Depression What problem did the gold standard eliminate? - Correct Answer the balance of payments problem: it was designed so that countries stay at an equilibrium and can not run giant trade deficits and surpluses balance of payments - Correct Answer the difference between the flow of money into and out of a country How did the gold standard hold up in the face of shocks to the economy? - Correct Answer it was inflexible
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