Y12 Eco Rev sheet - Unit 4 Topic 2

Why does recognition lag occur?

• Many economic reports tend to be forward-looking.

• It takes time to collect data and many economic reports are not totally current.

• Recessions don't last long enough to track.

• Financial markets move too quickly to collect the data.

Which of the following scenarios would lead to movement up the Phillips curve?

• A rise in aggregate demand

• Inflation remaining constant

• Aggregate supply remaining the same

• Unemployment rising

Which of the following types of time lags is an outside lag?

• The implementation lag

• The decision-making lag

• The induced expenditure lag

• The recognition lag

The incentive that private commercial banks offer in return for use of a depositor's money is called _____.

• the interest rate

• the amortisation rate

• the discount rate

• the prime rate

When economists look at economic output, in the short run, there tends to be _____.

• a trade-off between inflation and unemployment

• more inflation but lower prices

• a trade-off between prices and inflation

• no change in economic growth

How would the Reserve Bank of Australia (RBA) implement expansionary monetary policy?

• Raising the discount rate

• Lowering the rate of inflation

• Lowering the cash rate

• Selling treasury bonds

The rate banks pay to borrow money from the RBA is called the _____ rate.

• deposit

• minimum reserve

• cash

• discount

Based on the Phillips’ Curve, if the economy is already at full employment output and aggregate demand increases (ceteris paribus) over the next few months, how will this impact unemployment?

• Unemployment will be higher than its natural state.

• A change in aggregate demand is not enough information to infer changes in unemployment.

• Unemployment will be lower than its natural state.

• Unemployment will remain roughly the same.

The idea that active, discretionary government intervention via fiscal (or monetary) policy is the source of macroeconomic instability is associated with:

• conservative governments.

• monetarist economic theories.

• Keynesian economic theories.

• Adam Smith

What is the RBA doing when it engages in open market operations?

• Changing the discount rate.

• Raising fees on bank transactions.

• Buying or selling government securities to influence the cash rate and money supply.

• Changing the reserve requirements of banks.