3.1 Meaning of Money 1) Economists find no completely satisfactory way to measure money because A) money supply statistics are a state secret. B) the Federal Reserve does not employ or report different measures of the money supply. C) the "moneyness" or liquidity of an asset is a matter of degree. D) economists find disagreement interesting and refuse to agree for ideological reasons. Answer: C 2) To an economist, ________ is anything that is generally accepted in payment for goods and services or
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1. Three Functions of Money A) Measure of value B) Store of purchasing power C) Store of purchasing power D) Store of purchasing power E) Means of exchange F) Store of purchasing power 4. Bond Price Changes A) A bond worth $10 000 initially and has an interest rate of 4 percent, annual interest rates would be $400. A drop in interest rate to 2 percent means that the price of this bond rises to $20 000. (.02 x $20 000 = $400). B) A rise in interest rate to 6 percent causes the
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Bank holds more money than the required amount, it is called Excess reserves. It means it has over and above the stipulated amount it needs. The way it is calculated is by the required reserves x actual reserves= excess reserves. 5. A money multiplier measures the maximum amount of commercial bank money that can be created by a given unit of central bank money. To calculate, use the equation R/M is greater or equal to RR. In this equation, M is for commercial bank money (loans), R is for
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Part Three Answers to End-of-Chapter Problems Chapter 1 ANSWERS TO QUESTIONS 1. THE INTEREST RATE ON THREE-MONTH TREASURY BILLS FLUCTUATES MORE THAN THE OTHER INTEREST RATES AND IS LOWER ON AVERAGE. THE INTEREST RATE ON BAA CORPORATE BONDS IS HIGHER ON AVERAGE THAN THE OTHER INTEREST RATES. 2. The lower price for a firm’s shares means that it can raise a smaller amount of funds, so investment in facilities and equipment will fall. 3. Higher stock prices mean that
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PART THREE Answers to End-of-Chapter Problems Copyright © 2013 Pearson Addison-Wesley. All rights reserved. Chapter 1 ANSWERS TO QUESTIONS 1. The interest rate on three-month Treasury bills fluctuates more than the other interest rates and is lower on average. The interest rate on Baa corporate bonds is higher on average than the other interest rates. 2. The lower price for a firm’s shares means that it can raise a smaller amount of funds, so investment in facilities and equipment will fall.
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10) 4. How does an increase in the money supply affect the economy according to the monetarists v. Keynesians? 5. Which fiscal policy tool has the most direct affect on GDP? 6. Why do supply-siders think it is wise to reduce income taxes? And corporate taxes? 7. What is the difference between the simplified spending multiplier formula and the actual spending multiplier? 8. What is the difference between the simplified money multiplier formula and the actual money multiplier formula? 9. What is
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1 of 9 Economics 310 Money and Banking Practice Midterm Exam Winter 2008 The actual midterm will involve only 25 multiple choice questions, to be completed in 80 minutes. No calculators, no cell phones, no personal digital media players or any other electronic equipment should be visible or in use during the exam. Each question will score 4 points if correct, 1 point if unanswered and 0 points if incorrect. This means that your final exam score will lie between 0 and 100, but that you can score
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02913528 Riley Supply Plumbing & Heating Supply Marketing Analysis: The nature of Riley Supply is relatively self-explanatory from a business perspective. Based on the theory that there will be significant growth within the two suburbs it resides in, Riley will benefit from the revenues. Demand will depend on the rate of growth and how quickly people actually begin moving into the suburbs. Demand will change slightly due to cyclical and seasonal changes. Seasonal will account for whether
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POLICY WHAT IS MONETARY POLICY? Policy to control the supply of money in the country Targeting a rate of interest to attain objective of growth and stability of the economy. TYPES OF MONETARY POLICIES Expansionary • Increases the total supply of the money in the economy • Used to combat unemployment in a recession by lowering interest rates TYPES OF MONETARY POLICIES Contractionary • Decreases the total supply of the money in the economy • Used to combat inflation by raising interest
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certainly want to see what standings the economy is in, and if I would be able to actually afford my purchase over a period of time. Budgeting your money is a great way to ensure that you always have the money for the important things in your life therefore, it is great to see what shape the economy is in before you go out spending that hard earned money on something that you may not absolutely need at the moment or possibly won’t be able to afford over a longer period of time because of the shape
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