Macroeconomic Interrelations

How does inflation affect unemployment in an economy?

• Inflation has no impact on unemployment

• Inflation can lead to decreased demand for goods and services, causing businesses to produce less and potentially lay off workers, thus increasing unemployment.

• Inflation always leads to increased employment

• Inflation reduces unemployment by increasing wages

Explain the relationship between fiscal policy and economic growth.

• Fiscal policy has no impact on economic growth

• Fiscal policy can directly impact economic growth by adjusting government spending and taxation levels to stimulate or cool down the economy as needed.

• Fiscal policy only affects inflation rates, not economic growth

• Economic growth is solely determined by monetary policy

What impact does monetary policy have on interest rates?

• Monetary policy impacts interest rates by adjusting the money supply.

• Monetary policy has no impact on interest rates

• Monetary policy decreases interest rates by increasing the money supply

• Monetary policy increases interest rates by decreasing the money supply

Discuss the connection between trade deficits and exchange rates.

• Trade deficits can cause a country's currency to appreciate, which can help correct the trade imbalance by making exports more expensive and imports cheaper.

• Trade deficits always lead to a stronger currency.

• Trade deficits can cause a country's currency to depreciate, which can help correct the trade imbalance by making exports cheaper and imports more expensive.

• Trade deficits have no impact on exchange rates.

How does government spending influence the national debt?

• Government spending influences the national debt by decreasing it when expenditures exceed revenue.

• Government spending influences the national debt by increasing it when expenditures exceed revenue.

• Government spending has no impact on the national debt.

• Government spending influences the national debt by decreasing it when revenue exceeds expenditures.

What are some key economic indicators used to track business cycles?

• Stock market performance

• GDP growth rate, unemployment rate, inflation rate, consumer confidence index, industrial production

• Exchange rates

• Housing prices

What is the Phillips curve and how does it relate to inflation and unemployment?

• The Phillips curve relates inflation and unemployment by illustrating the trade-off between the two variables.

• The Phillips curve suggests that inflation decreases as unemployment increases.

• The Phillips curve shows a direct correlation between inflation and unemployment.

• The Phillips curve is a mathematical equation used to calculate inflation and unemployment simultaneously.

How can expansionary fiscal policy help during a recession?

• Expansionary fiscal policy can help during a recession by implementing strict austerity measures.

• Expansionary fiscal policy can help during a recession by decreasing money supply and raising interest rates.

• Expansionary fiscal policy can help during a recession by stimulating economic growth through increased government spending and/or tax cuts.

• Expansionary fiscal policy can help during a recession by reducing government spending and increasing taxes.

Explain the concept of the money supply and its effect on the economy.

• The money supply is a crucial factor in determining the level of economic activity and inflation. An increase in the money supply can lead to lower interest rates, higher borrowing, and spending, which can stimulate economic growth. Conversely, a decrease in the money supply can have the opposite effect.

• A decrease in the money supply results in higher interest rates

• Increasing the money supply always leads to deflation

• The money supply has no impact on the economy

What role does the central bank play in controlling interest rates?

• Adjusting the federal funds rate

• Setting stock market prices

• Printing more money

• Regulating international trade agreements