Econ Exam #2
for something to be considered money, it must:
be generally accepted as a medium of exchange
Open Market Operations, by definition, involved the
buying and selling of government securities, in order to expand or contract the amount of money in the banking system
A security is
claim on issuers future income or assets
The Federal funds rate is the
depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis.
In a fractional-reserve banking system, banks
generally lend out a majority of the funds deposited.
Borrowers in the loanable funds market consist of
governments and firms
Flat money, by definition, is money that
is inconvertible paper money made legal tender by a government degree
US Treasury securities are generally considered
less risky than any other bond b/c ppl don't expect the US govt. to default
Which of the following statements is true about stocks
part owner, more risky but higher return, firm has zero obligation, if firm goes bankrupt shareholders get paid last if they even do.
The notion of the loanable funds market is
savers (typically households and individuals) supply funds to borrowers (typically firms)
A bond is
securities that represent debt to be paid. Claim on issuers future income or assets
treasury securities are
such as bills, notes and bonds—are debt obligations of the U.S. government
If you attempted to determine if the standard of living of a country has increased by looking only at changes in its nominal gross domestic product (GDP), what would you be missing?
the fact the an increase in nominal GDP does not necessarily mean the standards of living rising, due to changes in prices and population.
Since 1980, growth rates in China have exceeded growth rates in the United States. Based on this information, the solow growth model would predict that
the marginal product is positive and decreases as the quantity of capital increases
Economic growth is determined by
the percent change in nominal GDP minus percent change in price level minus percent change in population
Consider a country that improves its educational system such that a greater percentage of workers become college educated. It is reasonable to expect:
the production function will shift upward
It is likely that as more baby boomers reach retirement
the supply of loanable funds will shift left
US Treasury securities are generally considered
to be immune to all of the following risks besides purchasing power risk
If a bank has a required reserve ration of 25 percent and the federal reserve conducts an open market purchase of $100,000 worth of bonds, what is the maximum possible change to the money supply?
$25,000
Suppose that the Bank of Apples has excess reserves of $450,000 and checkable deposits of $30,000,000. If the bank has a reserve requirement of 30%, what is the bank's total amount of reserves?
$9,450,000
If the government were to print more money, which of the following would occur?
Both M1 and M2 would increase
Which of the following do stocks and bonds have in common?
Both securities
firms that help to channel funds from savers to borrowers, (ex. bank) are known as
Financial Intermediaries
stocks are
Ownership shares in a firm -Another option for funding -Owners of stocks are actual owners of firms
Which of the following reflects an accurate economic chain of event
Savings finances investment, which allows the economy to grow from a larger capital stock
Provide the correct equation for the simple money multiplier (m^m)
1/r r=the reserve ratio
From 2006 to 2010, per capita real gross domestic product (GDP) in Japan grew an average of 0.46% per year. At that rate, according to the Rule of 70, in roughly how many years will the Japanese economy double in size?
152 years
An example of physical capital is:
All of the items are examples of physical capital. Or factory
The face value of a bond is the
Amount paid to the holder at maturity
How is owner's equity calculated?
Assets minus liabilities
Lauren owns a bakery. She wants to increase her daily production of baked goods, so she knows she needs to acquire more resources. Which of the following actions would represent an increase in the physical capital resource at her bakery?
Moving into a larger space
The aggregate production function describes the relationship between the
aggregate GDP of a nation and its factors of production
Consider a country that suffered through five years of civil war, but now has a stable government that has the support of the majority of the people. In this country, we are likely to observe:
an increase in physical capital and an upward shift of the production function.
Inflation is occurring in a nation; the implication
holding nominal wages constant, the real wage would fall.
Lenders in the loanable funds market consist of
households and foreign entities
Businesses became more pessimistic during the Great Recession of 2007-2009. As a result:
investment demand fell
Every _____________ requires a ______________
investment dollar; savings dollar