All Flashcards
What is the impact of expansionary fiscal policy on aggregate demand?
It increases aggregate demand.
What is the impact of contractionary fiscal policy on aggregate demand?
It decreases aggregate demand.
What is the impact of expansionary monetary policy on interest rates?
It lowers interest rates.
What is the impact of contractionary monetary policy on interest rates?
It raises interest rates.
What is one potential benefit of imposing a tariff?
Protecting domestic jobs.
What is a negative consequence of tariffs for consumers?
Consumers pay higher prices.
How do quotas affect the prices consumers pay?
Quotas lead to higher prices for consumers.
What is the impact of a tariff on domestic production?
It leads to increased domestic production.
What is the impact of a quota on government revenue?
Quotas do not generate revenue for the government.
What is the impact of expansionary monetary policy on net exports?
It tends to increase net exports as the currency depreciates.
In a FOREX graph, what does a rightward shift of the demand curve indicate?
An increase in demand for that currency, leading to appreciation.
In a FOREX graph, what does a leftward shift of the demand curve indicate?
A decrease in demand for that currency, leading to depreciation.
On a tariff graph, what area represents government revenue?
The rectangle formed by the tariff amount and the quantity of imports after the tariff.
On a tariff graph, how is the change in consumer surplus represented?
By the area between the original price, the new price with the tariff, and the demand curve.
On a tariff graph, how is the change in producer surplus represented?
By the area between the original price, the new price with the tariff, and the supply curve.
On a quota graph, what happens to the supply curve?
The supply curve shifts to the right, reflecting the limited quantity of imports allowed.
On a quota graph, what area represents the revenue gained by foreign producers?
The area between the world price, the quota price, and the quantity of imports under the quota.
What does the intersection of supply and demand curves represent in a FOREX graph?
The equilibrium exchange rate.
How is the quantity of imports shown on a tariff graph before a tariff is imposed?
The horizontal distance between the domestic supply and demand curves at the world price.
How does a tariff affect the quantity of imports shown on a graph?
It reduces the horizontal distance between the domestic supply and demand curves at the new price.
Define currency appreciation.
A currency becomes more valuable relative to another currency.
Define currency depreciation.
A currency becomes less valuable relative to another currency.
What is expansionary fiscal policy?
Government increases spending or cuts taxes to increase aggregate demand.
What is contractionary fiscal policy?
Government decreases spending or raises taxes to decrease aggregate demand.
What is expansionary monetary policy?
Central bank increases the money supply to lower interest rates and increase aggregate demand.
What is contractionary monetary policy?
Central bank decreases the money supply to raise interest rates and decrease aggregate demand.
Define a tariff.
A tax on imported goods.
What is a revenue tariff?
A tax on goods not produced domestically, primarily for raising government revenue.
What is a protective tariff?
A tax on goods also produced domestically, designed to protect domestic jobs.
Define an import quota.
A limit on the quantity of a good that can be imported.