econ midterm 2
Which of the following will help to prevent bank runs?
100% reserve banking
Suppose a cup of coffee is 1.5 euros in Germany and $0.50 in the United States. If purchasing-power parity holds, what is the nominal exchange rate between euros and dollars?
3 euros per dollar
Suppose the Fed purchases a $1,000 government bond from you. If you deposit the entire $1,000 in your bank, what is the total potential change in the money supply as a result of the Fed's action if reserve requirements are 20 percent?
5000
In 2018 the Bureau of Labor Statistics reported that there were 57.4 million people over age 25 whose highest level of education was some college or an associate degree. Of these, 36.3 million were employed and 1.2 million were unemployed. What were the labor-force participation rate and the unemployment rate for this group?
65.3% and 3.2%
Suppose the real exchange rate between Russia and the United States is defined in terms of bottles of Russian vodka per bottle of U.S. vodka. Which of the following will increase the real exchange rate (that is, increase the number of bottles of Russian vodka per bottle of U.S. vodka)?
All of the above will increase the real exchange rate.
Which of the following statements regarding the market for foreign-currency exchange is true?
An increase in U.S. net capital outflow increases the supply of dollars and the dollar depreciates.
Which list ranks assets from most to least liquid?
Currency, stocks, fine art
Octavia does not currently have a job, but she has applied for several jobs in the previous week. Eve is an unpaid stay-at-home mom who has not searched for work in recent years. Who does the Bureau of Labor Statistics count as "not in the labor force"?
Eve but not Octavia
Which of the following policies can the Fed follow to increase the money supply?
Reduce the interest rate on reserves
Which of the following people or firms would be pleased by a depreciation of the dollar?
an Italian importer of U.S. steel
Matilda just graduated from college. In order to devote all her efforts to college, she didn't hold a job. She is going to tour around the country on her motorcycle for a month before she starts looking for work. Other things the same, the unemployment rate
and the labor-force participation rate are both unaffected.
If the interest rate is 4 percent, then you would be equally happy if you received a gift of either $100 today or a gift of
b. $112.49 three years from today.
Using the rule of 70, if your income grows at 10 percent per year, your income will double in approximately
b. 7 years.
Use the following table to answer question. Numbers are in millions.
b. 98.0 million.
In a closed economy, what does (Y − T − C) represent?
b. Private saving
For an open economy, the equation Y = C + I + G + NX is an identity. If we define national saving, S, as the total income in the economy that is left after paying for consumption and government purchases, then for an open economy, it is true that
b. S = I + NX.
In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?
b. The government's tax revenue is equal to its expenditures.
A budget deficit
b. changes the supply of loanable funds.
Sectoral shifts tend to raise which type of unemployment?
b. frictional unemployment
Which of the following policy combinations would consistently work to increase the money supply?
buy government bonds, decrease reserve requirements, decrease the discount rate
Which of the following does not help reduce the risk that people face?
c. increasing the rate of return within their portfolio
Whenever the price of an asset rises above what appears to be its fundamental value, the market is said to be experiencing a
c. speculative bubble.
A country must have a positive net outflow of capital if it has a trade deficit.
f
In the early 1900s, Henry Ford introduced a
high-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory.
Unions tend to increase the disparity in pay between insiders and outsiders by
increasing the wage in the unionized sector, which may create an increase in the supply of workers in the nonunionized sector.
Given that Monika's income exceeds her expenditures, Monika is best described as a
saver or as a supplier of funds.
When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.
t
Minimum-wage laws are most likely to affect the wages paid to
teenagers.
To insulate the Federal Reserve from political pressure,
the Board of Governors are appointed to fourteen-year terms.
We associate the term debt finance with
the bond market, and we associate the term equity finance with the stock market.
If the exchange rate changes from 3 Brazilian reals per dollar to 4 reals per dollar,
the dollar has appreciated.
If banks increase their holdings of excess reserves
the money multiplier and the money supply decrease.
A decrease in the reserve requirement causes
the money multiplier to rise.
Suppose all banks maintain a 100 percent reserve ratio. If an individual deposits $1,000 of currency in a bank,
the money supply is unaffected
Suppose the money supply in Mexico grows more quickly than the money supply in the United States. We would expect that
the peso should depreciate relative to the dollar.
Suppose the inflation rate over the last 20 years has been 10 percent in Great Britain, 7 percent in Japan, and 3 percent in the United States. If purchasing-power parity holds, which of the following statements is true? Over this period,
the yen should have risen in value compared to the pound and fallen compared to the dollar.
The Board of Governors of the Federal Reserve System consists of
up to seven members appointed by the president.
If a nation is selling more goods and services to foreigners than it is buying from them, then on net it must be selling assets abroad.
f
Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
f
Other things the same, an increase in the foreign price level leads to an increase in the real exchange rate.
f
Other things the same, an increase in the real exchange rate raises U.S. net exports.
f
When a firm pays an efficiency wage, it may
find that its workers quit less frequently.
Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium?
a. frictional unemployment
Which of the following reduces risk in a portfolio the greatest?
a. increasing the number of stocks in the portfolio from 1 to 10
A bond tends to pay a high interest rate if it is
a. issued by a corporation of dubious credit quality.
Suppose that Thom experiences a greater loss in utility if he loses $50 than he would gain in utility if he wins $50. This implies that Thom's
a. marginal utility diminishes as wealth rises, so he must be risk averse.
If Americans become less concerned with the future and save less at each real interest rate,
a. real interest rates rise and investment falls.
By itself, when a Japanese bank purchases a bond issued by a U.S. corporation, U.S. net capital outflow rises.
f
Sari puts $100 into an account with an interest rate of 10 percent. According to the rule of 70, about how much does she have at the end of 21 years?
800
Which of the following statements regarding the market for foreign-currency exchange is true?
An increase in U.S. net exports increases the demand for dollars and the dollar appreciates.
The following figure shows a utility function for Britney. Refer to Figure 27-1 . From the appearance of the utility function, we know that
Britney is risk averse
Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?
Corporate bond, U.S. government bond, municipal bond
Which of the following is included in both M1 and M2?
Currency, demand deposits, and other checkable deposits
Which of the following should cause the price of a share of stock to rise?
a. a reduction in market risk b. an increase in expected dividends c. a reduction in the interest rate d. All of the above should cause the price to rise.
Which of the following government policies would fail to lower the unemployment rate?
b. raise the minimum wage
In a closed economy, public saving is the amount of
b. tax revenue that the government has left after paying for its spending.
In a system of 100-percent-reserve banking,
banks do not influence the supply of money
Which of the following is not a characteristic of minimum-wage workers? They tend to be
c. full-time.
Refer to Figure 27-4. Which of the following statements is correct?
d. The figure shows that the greater the risk, the greater the return.
Speculative bubbles may occur in the stock market
d. because rational people may buy an overvalued stock if they think they can sell it to someone for even more at a later date.
According to the Bureau of Labor Statistics, a husband who chooses to stay home and take care of the household is
d. not in the labor force.
Unions might increase efficiency in the case where they
d. offset the market power of a large firm in a "company town."
The amount of unemployment that the economy normally experiences is known as
d. the natural rate of unemployment.
If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.
f
To increase domestic investment, a country must increase its saving.
f
If people are risk averse, then
they dislike bad things more than they like comparable good things. b. their utility functions exhibit the property of diminishing marginal utility of wealth. c. the utility they would lose from losing a $50 bet would exceed the utility they would gain from winning a $50 bet.
The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. Refer to Figure 26-3. What, specifically, does the vertical axis represent?
c. The interest rate
It is difficult for an actively managed mutual fund to outperform an index fund because
c. actively managed funds trade more often and charge fees for their alleged expertise.
Compared to a portfolio composed entirely of stock, a portfolio that is 50 percent government bonds and 50 percent stock will have a
c. lower return and a lower level of risk.
Financial intermediaries are
financial institutions through which savers can indirectly provide funds to borrowers.
Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium?
frictional unemployment
Table 29-3 The First Bank of RoswellAssetsLiabilitiesReserves$30,000 Deposits$200,000Loans170,000 Refer to Table 29-5. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will
have $64,000 in excess reserves.
Reserves$30,000 Deposits$200,000Loans170,000 Refer to Table 29-3. If the bank faces a reserve requirement of 6 percent, then the bank
is in a position to make new loans equal to a maximum of $18,000.
As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,
sell bonds
If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by
selling bonds. This selling would reduce reserves.
If over the next year the inflation rate in the euro area is higher than the inflation rate in Japan, then the euro should depreciate relative to the Japanese yen.
t
If prices in Mexico rise at a higher rate than prices in the U.S., then according to purchasing-power parity the U.S. nominal exchange rate with Mexico should rise.
t
Other things the same, an increase in the nominal exchange rate raises the real exchange rate.
t
Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.
t
Reductions in transportation costs help explain the increase in U.S. trade flows.
t
It is claimed that a secondary advantage of mutual funds is that
they give ordinary people access to the skills of professional money managers.
A bond promises to pay $500 in one year and $10,500 in two years. What is the correct way to find the present value of this bond?
$500/(1 + r) + $10,500/(1 + r)2
Table 28-2Suppose people in the adult population in a small country are classified based on their age. Labor Force StatusAgeLess than 5555 and OlderNumber employed400,000100,000Number unemployed25,0007,000Number in population600,000200,000 Refer to Table 28-2. In the proper order, which age group has the highest unemployment rate and which has the highest labor-force participation rate?
55 and older, under 55
Which of the following statements regarding the loanable-funds market is true?
An increase in the government budget deficit shifts the supply of loanable funds to the left.
Which of the following statements about a bank's balance sheet is true?
Assets minus liabilities equals owner's equity or capital.
Which of the following statements is not true about the relationship between national saving, investment, and net capital outflow?
For a given amount of saving, a decrease in net capital outflow must decrease domestic investment.
A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement.
It has $800 in reserves and $9,200 in loans
Which of the following is not a function of money?
Protection against inflation
If the nominal exchange rate between British pounds and dollars is 0.5 pound per dollar, how many dollars can you get for a British pound?
Suppose the nominal exchange rate between the Japanese yen and the U.S. dollar is 100 yen per dollar. Further, suppose that a pound of hamburger costs $2 in the United States and 250 yen in Japan. What is the real exchange rate between Japan and the United States?
Which of the following groups meets to discuss changes in the economy and determine monetary policy?
The Federal Open Market Committee
Suppose, due to political instability, Mexicans suddenly choose to invest in U.S. assets as opposed to Mexican assets. Which of the following statements is true regarding U.S. net capital outflow?
U.S. net capital outflow falls.
Which of the following statements is true?
When the Fed sells government bonds, the money supply decreases.
The phrase "twin deficits" refers to
a country's trade deficit and its government budget deficit.
Historically, index funds have had ________ than most actively managed mutual funds.
a. better returns
Stock prices will follow a random walk if
a. markets reflect all available information in a rational way.
Diversification of a portfolio can
a. reduce firm-specific risk.
Which one of the following types of unemployment results from the wage being held above the competitive equilibrium wage?
a. structural unemployment
National saving is
a. the total income in the economy that remains after paying for consumption and government purchases.
If people are risk averse, then
a. they dislike bad things more than they like comparable good things. b. their utility functions exhibit the property of diminishing marginal utility of wealth. c. the utility they would lose from losing a $50 bet would exceed the utility they would gain from winning a $50 bet. d. all of the above are true.
Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have available to lend out if it decides to hold only required reserves?
$27,000
A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?
150
If the reserve ratio is 25 percent, the value of the money multiplier is
4
Which of the following statements about trade policy is true?
A country's trade policy has no impact on the size of its trade balance.
Which of the following groups would be most harmed by a U.S. government budget deficit?
Boeing Aircraft Manufacturing wishing to sell jets to Saudi Arabia
Which of the following would directly increase U.S. net capital outflow?
Microsoft builds a new distribution facility in Sweden.
Each of the following is a reason why the U.S. economy continues to engage in greater amounts of international trade except which one?
NAFTA imposes requirements for increased trade between countries in North America.
Which of the following statements is true about a country with a trade deficit?
Net exports are negative.
If the United States imposes a quota on the importing of apparel produced in China, which of the following is true regarding the market for foreign-currency exchange?
The demand for dollars increases and the dollar appreciates.
Suppose, due to political instability, Mexicans suddenly choose to purchase U.S. assets as opposed to Mexican assets. Which of the following statements is true regarding the value of the dollar and U.S. net exports?
The dollar appreciates, and U.S. net exports fall.
Who of the following is not included in the Bureau of Labor Statistics' "employed" category?
Those waiting to be recalled to a job from which they had been laid off
Which of the following groups would not benefit from a U.S. import quota on Japanese autos?
U.S. farmers who export grain
An increase in Europe's taste for U.S.-produced Fords would cause the dollar to
appreciate, but the total value of U.S. net exports stays the same.
When people take advantage of differences in prices for the same good by buying it where it is cheap and selling it where it is expensive, it is known as
arbitrage
Consider two people who are currently out of work. Tim is not looking for work because there have been many job cuts where he lives, and he doesn't think it likely that he will find work. Bev is not currently looking for work, but she would like a job, and she has looked for work in the past. The Bureau of Labor Statistics considers
both Tim and Bev to be marginally attached workers.
The natural rate of unemployment includes
both frictional and structural unemployment.
In the 1990s Ireland made unemployment benefits less generous. This change would likely have reduced
both frictional unemployment and the natural rate of unemployment.
The M1 money supply is composed of
currency, demand deposits, traveler's checks, and other checkable accounts.
General Electric has the opportunity to purchase a new factory today that will provide them with a $50 million return four years from now. If prevailing interest rates are 6 percent, what is the maximum that the project can cost for General Electric to be willing to undertake the project?
d. $39,604,682
Use the following table to answer question. Numbers are in millions. The labor-force participation rate is
d. 70.2 percent.
Which of the following statements about efficiency wage theory is true?
d. Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort.
Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has
gradually decreased.
The existence of money leads to
greater specialization and to a higher standard of living.
Commodity money
has intrinsic value.
An increase in U.S. private saving
increases U.S. net exports and U.S. net capital outflow the same amount.
Capital flight
increases a country's net exports and decreases its long-run growth path.
An increase in the government budget deficit
increases the real interest rate and crowds out investment.
Which of the following reduces risk in a portfolio the greatest?
increasing the number of stocks in the portfolio from 1 to 10
The Fed's tools of monetary control are
open-market operations, lending to banks, reserve requirements, and paying interest on reserves.
An example of fiat money is
paper dollars.
Long-term bonds are
riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
A nation with a trade surplus will necessarily have saving that is greater than domestic investment.
t
If a country's net exports fall, then its net capital outflow falls by the same amount.
t
Movies are a major export of the U.S.
t
The discount rate is
the interest rate the Fed charges on loans to banks.
Use the following table to answer question. Numbers are in millions. The labor force is
98.0 million.
If a depositor puts $100 in a bank account that earns 4 percent interest compounded annually, how much will be in the account after five years?
a. $121.67
The largest reduction in a portfolio's risk is achieved when the number of stocks in the portfolio is increased from
a. 1 to 10.
The most accurate measure of the international value of the dollar is
an exchange rate index that accounts for many exchange rates.
An economy that interacts with other economies is known as
an open economy.
In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving?
c. Public and national saving would fall.
Public policy
can reduce both frictional unemployment and the natural rate of unemployment.
Unions tend to increase the disparity in pay between insiders and outsiders by
d. increasing the wage in the unionized sector, which may create an increase in the supply of workers in the nonunionized sector.
Recently, Lisa's wealth increased by $500. If her wealth were to increase by another $500 in the near future, then her utility would increase, but not by as much as it increased with the recent increase to her wealth. Based on this information, and graphing wealth on each horizontal axis, Lisa's utility function
d. is upward sloping and her marginal utility function is downward sloping.
If the Fed raises the interest rate it pays on reserves, it will ________ the money supply by increasing ________.
decrease, excess reserves
Required reserves of banks are a fixed percentage of their
deposits.
Which of the following policy actions by the Fed is likely to increase the money supply?
reducing reserve requirements
If the U.S. real exchange rate is greater than 1, then there is the possibility of arbitraging by buying foreign goods to sell in the U.S.
t
Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the price is higher. Jason plans to engage in arbitrage.
t
Other things the same, an increase in the U.S. real exchange rate makes U.S. goods more expensive relative to foreign goods.
t
If the efficient markets hypothesis is true, then
the stock market is informationally efficient so stock prices should follow a random walk.
Some frictional unemployment is inevitable because
there are changes in the demand for labor among different firms.
Crowding out occurs when investment declines because a budget
a. deficit makes interest rates rise.
The study of a company's accounting statements and future prospects to determine its value is known as
a. fundamental analysis.
Firm-specific risk is the
b. uncertainty associated with specific companies.
Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?
$4,937.5 billion
Suppose Joe changes his $1,000 demand deposit from Bank A to Bank B. If the reserve requirement is 10 percent, what is the potential change in demand deposits as a result of Joe's action?
0
The following data is about the labor market in the city of Productionville. Wage (Dollars per hour) Quantity Demanded (Units) Quantity Supplied (Units) 86,00016,00079,00014,000612,00012,000515,00010,000418,0008,000 Refer to Table 28-4. If the local government imposed a minimum wage of $4 in Productionville, how many people would be unemployed?
0
A minimum-wage law tends to
a. create more unemployment in low-skill job markets than in high-skill job markets.
If the United States imposes a quota on the importing of apparel produced in China, which of the following is true regarding U.S. net exports?
Net exports will remain unchanged.
Which of the following should cause the price of a share of stock to rise?
a reduction in market risk b. an increase in expected dividends c. a reduction in the interest rate d. All of the above should cause the price to rise
An export subsidy should have the opposite effect of
a tariff
An example of trade policy is
a tariff on sugar.
An increase in the prevailing interest rate
a. decreases the present value of future returns from investment and decreases investment.
Using the rule of 70, if your parents place $10,000 in a deposit for you on the day you are born, approximately how much will be in the account when you retire at 70 years old if the deposit earns 3 percent per year?
a. $80,000
Use the following table to answer question. Numbers are in millions. The unemployment rate is
a. 5.8 percent.
Which of the following is an example of moral hazard?
a. After Joe buys fire insurance, he begins to smoke cigarettes in bed.
Which of the following statements regarding the loanable-funds market is not true?
a. An increase in a country's net capital outflow shifts the supply of loanable funds to the left.
Which of the following is an example of a reason why firms might pay efficiency wages?
a. At equilibrium wages, workers often quit to find better jobs. b. At equilibrium wages, workers sleep when the boss is not looking because workers are not deeply concerned about being fired. c. At equilibrium wages, only minimally qualified workers apply for the job. d. At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy. e. All of the above are true.
Refer to Figure 27-1 . Suppose the vertical distance between the points (0, A) and (0, B) is 5. If her wealth increased from $1,050 to $1,350, then
a. Britney's subjective measure of her well-being would increase by less than 5 units.
Which of the following statements is true?
a. Prime-age men and women tend to have similar unemployment rates.
If unemployment insurance were so generous that it paid laid-off workers 95 percent of their regular salary,
b. the official unemployment rate would probably overstate true unemployment.
If the efficient markets hypothesis is true, then
b. the stock market is informationally efficient so stock prices should follow a random walk.
If government spending exceeds tax collections,
b. there is a budget deficit.
When you were 10 years old, your grandparents put $500 into an account for you paying 7 percent interest. Now that you are 18 years old, your grandparents tell you that you can take the money out of the account. What is the balance to the nearest cent?
c. $859.09
An accountant with a CPA designation who has been unable to find work for so long that she has stopped looking for work is considered to be
c. not in the labor force.
If, for any reason, the wage is held above the competitive equilibrium wage,
c. the quantity of labor supplied will exceed the quantity of labor demanded and there will be unemployment.
If two countries start with the same real GDP per person, and one country grows at 2 percent while the other grows at 4 percent,
c. the standard of living in the country growing at 4 percent will start to accelerate away from the slower growing country due to compound growth.
Some frictional unemployment is inevitable because
c. there are changes in the demand for labor among different firms.
The slope of the supply of loanable funds curve represents the
d. positive relation between the interest rate and saving.
If GDP = $1,000, consumption = $600, taxes = $100, and government purchases = $200, how much is saving and investment?
d. saving = $200, investment = $200
Other things unchanging, a higher U.S. real interest rate
decreases U.S. net capital outflow because U.S. residents and foreigners prefer to invest in the United States.
An increase in the U.S. government budget deficit
decreases U.S. net exports and U.S. net capital outflow the same amount.
Which of the following products would likely be the least accurate if used to calculate purchasing-power parity?
dental services
The large trade deficits in the U.S. during the 1990's were primarily associated with a rise in domestic investment spending rather than a rise in the budget deficit.
t
When a company from Germany builds an automobile factory in the United States, the German firm has engaged in foreign direct investment.
t
If the Fed engages in an open-market purchase, and at the same time, it raises reserve requirements,
we cannot be certain what will happen to the money supply.
David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of
barter, since the sneakers in the correct size have intrinsic value to both David and Asher.
If the United States saves $1,000 billion and U.S. net capital outflow is -$200 billion, U.S. domestic investment is
$1,200 billion.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Tazian dollar. Aggregate banking statistics show that collectively the banks of Tazi hold $300 million of required reserves, $75 million of excess reserves, have issued $7,500 million of deposits, and hold $225 million of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. Refer to Scenario 29-1. Suppose the Bank of Tazi loaned the banks of Tazi $10 million. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?
$200 million
The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?
It falls by $12 billion.
If Japan exports more than it imports,
Japan's net capital outflow must be positive.
Which of the following is an example of foreign direct investment?
McDonald's builds a restaurant in Moscow.
Suppose a U.S. resident buys a Jaguar automobile from Great Britain and the British exporter uses the receipts to buy stock in General Electric. Which of the following statements is true from the perspective of the United States?
Net exports fall, and net capital outflow falls
The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland, investment is
a. $6 billion and consumption is $6 billion.
The amount of money today needed to produce a particular sum in the future, given prevailing interest rates, is known as
b. present value.
The federal funds rate is the
interest rate at which banks lend reserves to each other overnight.
By definition, equity finance
is accomplished when firms sell shares of stock.
Sheila is on a temporary layoff from her automobile factory job but has not looked for work in the last four weeks. The Bureau of Labor Statistics counts Sheila as
unemployed and in the labor force.