Macroeconomics- chapter 14-17

Assume the Fed creates excess reserves in the banking system by buying government bonds, but banks do not make more loans because economic conditions are bad. This situation is a problem of

"You can lead a horse to water, but you can't make it drink."

Refer to the accompanying consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 10 percent. All figures are in billions. The commercial banking system has excess reserves of

$0 billion

Refer to the accompanying table. If a bank has checkable deposits of $45 million and reserves of $2 million, then its excess reserves are

$0.65 million

Refer to the given table. The value of the dollar in year 2 is

$0.80

Refer to the given table. The value of the dollar in year 3 is

$1.25

Refer to the graph, which shows the domestic demand and supply curves for a specific product in a hypothetical nation called Econland. At what price will Econland be neither importing nor exporting the product?

$1.50

If the nominal GDP is $477 billion and the velocity of money is 4.5, then the money supply is

$106 Billion

Assume that a person saves $50,000 and earns 7 percent annual interest. If the marginal tax rate is 36 percent, then the after-tax interest earnings will be

$2,240

If nominal GDP is $800 billion and, on average, each dollar is spent four times in the economy over a year, then the quantity of money demanded for transactions purposes will be

$200 Billion

Suppose the reserve requirement is 20 percent. If a bank has checkable deposits of $4 million and actual reserves of $1 million, it can safely lend out

$200,000

The accompanying tables show data for the hypothetical nations of Alpha and Beta. Qs is domestic quantity supplied, and Qd is domestic quantity demanded. Assuming that Alpha and Beta are the only two nations in the world, the equilibrium world price of steel must be between

$3 and $2

Assume monetary equilibrium exists—that is, the desired and the actual supply of money are equal—when nominal GDP equals $480 billion and the money supply is $160 billion. According to a strict monetarist view, an increase in the money supply of $10 billion will increase the nominal GDP by

$30 Billion

$500 invested at an annual interest rate of 8 percent will be worth how much at the end of one year?

$540

The figures in the table are for a single commercial bank. All figures are in thousands of dollars. This bank has total assets of

$580 million

Assume monetary equilibrium exists; that is, the desired and actual supply of money are equal. Also assume that nominal GDP equals $960 billion and the money supply is $160 billion. From a strict monetarist view, an increase in the money supply by $12 billion will increase nominal GDP by

$72 Billion

Assume Company X deposits $100,000 in cash in commercial Bank A. If no excess reserves exist at the time this deposit is made and the reserve ratio is 20 percent, Bank A can increase the money supply by a maximum of

$80,000

A promised amount $FV n years into the future is worth how much today, if the interest rate is i percent per year?

$FVn/(1 + i)n

f P equals the price level expressed as an index number and $V equals the value of the dollar, then

$V = 1/P.

The accompanying diagram represents a flexible exchange market for foreign currency. At the equilibrium exchange rate,

1.25 euros will buy $1.

Assume that a bank initially has no excess reserves. If it receives $5,000 in cash from a depositor and the bank finds that it can safely lend out $4,500, the reserve requirement must be

10 %

The Federal Reserve System is divided into

12 districts

The Federal Reserve System was created in

1913

If M is $400, P is $4, and Q is 300, then V must be

3

Refer to the graph. If the initial equilibrium interest rate was 5 percent and the money supply increased by $100 billion, then the new interest rate would be

3 percent

If a certain household earns and spends $24,000 per year and, on the average, holds a money balance of $6,000, then the velocity of money for this household is

4

According to the Taylor rule, when real GDP is equal to potential GDP and the inflation rate is equal to its target rate of 2 percent, the Federal funds rate should be

4 percent, and this implies a real interest rate of 2 percent.

The Board of Governors of the Federal Reserve has ____ members.

7

Refer to the graph, which shows the import demand and export supply curves for two nations that produce a certain product. The import demand curves for the two nations are represented by lines

7 and 8

Burt bought a house for $250,000 and plans to rent it out for $2,000 per month. His expected annual rate of return from renting the house is approximately

9.6 %

Pigou buys a house for $500,000, rents it for $2,000 per month for four years, and then sells it for $600,000. What is Pigou's per-year rate of return?

9.8 percent

Which of the following transactions has the immediate effect of increasing the money supply M1?

A commercial bank buys government securities from the general public.

Checkable deposits are money because they are

Acceptable as payment

The accompanying tables show data for the hypothetical nations of Alpha and Beta. Qs is domestic quantity supplied, and Qd is domestic quantity demanded. At a world price of $2,

Alpha will want to import 20 units of steel.

A checkable deposit at a commercial bank is a(n)

Asset to the depositor and a liability to the bank

Refer to the graph, which shows the supply and demand for money, where Dm1, Dm2, and Dm3 represent different demands for money and Sm1, Sm2, and Sm3 represent different levels of the money supply. The initial equilibrium point is A. What will be the new equilibrium point following a decrease in the money supply?

B

The accompanying tables show data for the hypothetical nations of Alpha and Beta. Qs is domestic quantity supplied, and Qd is domestic quantity demanded. Assuming that Alpha and Beta are the only two nations in the world, at the equilibrium world price,

Beta will export steel and Alpha will import steel.

The central authority of the U.S. banking system is the

Board of Governors of the Federal Reserve.

Refer to the graph, which shows the import demand and export supply curves for two nations that produce a certain product. In this two-nation model, the equilibrium world price and quantity will be

C and Q2

Kick is looking to play for a U.S. MLS team. D.C. United is offering him $50 million for his first year. The Chicago Fire is offering him $25 million his first year and $10 million per year for the following three years. The market interest rate is 5 percent. Which offer is the better deal in terms of present value in millions?

Chicago Fire, because it will pay him $52.2 million compared with $50 million from D.C. United

Refer to the given market-for-money diagrams. The total demand for money is shown by

D3

Which of the following are liabilities to a bank?

Demand and time deposits

(Last Word) Which of the following best explains why there may exist a negative lower bound for interest rates, beyond which lowering interest rates is counterproductive?

Depositors will be willing to accept small negative interest rates in exchange for the convenience of being able to make electronic transactions.

Refer to the graph. Assume that the economy is in initial equilibrium where AD1 intersects AS1. If there is a decrease in aggregate demand to AD2, then, according to mainstream economists, if prices and wages are not flexible, this will result in an equilibrium at point

E

In prosperous times, commercial banks are likely to hold very small amounts of excess reserves because

Federal Reserve Banks pay lower rates of interest on bank reserves than could be earned by the commercial banks loaning out the reserves.

Refer to the graph, which shows the supply and demand for British pounds. D1 and S1 represent the initial demand and supply curves. If there is a huge increase in the desire of U.S. buyers to consume UK products, and the British government starts buying U.S. dollars in order to fix the exchange rate at the initial level, then the new equilibrium will be at point

H

Refer to the diagram, which pertains to two nations and a specific product. The equilibrium level of exports and imports occurs at

H, where GB and FC intersect.

Refer to the diagram, which pertains to two nations and a specific product. The equilibrium world price occurs at

I

(Last Word) Which of the following best describes the policy of "extend and pretend"?

In its role as lender of last resort, the Federal Reserve did not distinguish between insolvent and solvent firms.

Which of the following statements is correct?

Interest rates and bond prices vary inversely

Which statement is true of a world with a system of fixed exchange rates as opposed to one with floating rates?

It increases the role of the central banks in foreign exchange markets.

The idea that reductions in tax rates will increase tax revenue is illustrated by the

Laffer Curve

The equation of exchange is

MV = PQ

Which of the following is a difference between "quantitative easing" and ordinary open-market operations?

Open-market operations are focused exclusively on U.S. government bonds; quantitative easing also includes the buying and selling of debt issued by government agencies and government-sponsored entities.

Refer to the graph. Assume that the economy is initially at equilibrium at point A. If there is a recession in the economy because AD1 shifts to AD2, and wages and prices are flexible, then in the long run the price level will be

P3 and real output will be Qf.

The correct formula that relates present value (PV) to future value (FV), if interest rate is i percent per year over n years is

PV = FVn/(1 + i)n.

Refer to the diagram for a specific economy. The curve on this graph is known as a

Phillips Curve

which of the following is a true statement

The long-run Phillips Curve is vertical.

The bailout money that went to giant financial institutions like Citibank and Goldman Sachs, along with General Motors and Chrysler, during the Financial Crisis and the Great Recession, came from the

Troubled Assets Relief Program

Monetarists say

a change in the money supply will change aggregate demand and therefore the nominal GDP.

A declining amount of foreign-exchange reserves resulting from maintaining a pegged exchange rate would have which of the following effects

a decrease in domestic money supply

Commercial bank reserves, most of which are held by the Federal Reserve Banks, are

a liability of the Federal Reserve Banks and an asset for commercial banks.

Which event probably contributed to the stagflation of the 1970s?

a sharp rise in the price of oil

The idea that money has "time value" refers to the fact that

a specific amount of money is more valuable to a person the sooner it is received.

Refer to the graph. If Qf is potential GDP and wages and prices are flexible, then the long-run aggregate supply curve will be

a vertical line at Qf

Assume that Japan and the United States are engaged in a system of flexible exchange rates. Refer to the graph. An increase in the supply of yen will result in

an appreciation of the U.S. dollar.

When cash is deposited in a checkable-deposit account at a bank, there is

an increase in the bank's liabilities.

Under a system of freely flexible (floating) exchange rates, a U.S. trade deficit with Mexico will tend to cause

an increase in the dollar price of pesos

stagflation refers to

an increase in the price level accompanied by decreases in real output and employment

If government uses its stabilization policies to maintain full employment under conditions of cost-push inflation,

an inflationary spiral is likely to occur.

The accompanying table gives data for Country X. Column 1 of the table is the price of a product. Column 2 is the quantity demanded domestically (Qdd), and Column 3 is the quantity supplied domestically (Qsd). If Country X opens itself up to international trade, at what world price will it begin importing some units of the product?

any price below $3.00

If real interest rates rise in the United Kingdom relative to the United States, then this event is most likely to cause the British pound to

appreciate and the U.S. dollar to depreciate.

In considering euros and dollars, the rates of exchange for the euro and the dollar

are inversely related

The federal funds market is the market in which

banks borrow reserves from one another on an overnight basis

Proponents of the managed floating exchange rate system argue that it has

been sufficiently flexible to weather major economic turbulence.

According to the equation of exchange, changes in the money supply can affect

both the price level and real output

Refer to the given market-for-money diagrams. If the interest rate was at 8 percent, people would

buy bonds, which would cause bond prices to rise and the interest rate to fall.

In new classical economics, a "price-level surprise"

causes a temporary change in real output.

If China maintains a pegged exchange rate with the U.S. dollar, and the consequence is rising inflation, then the pegged value of the Chinese yuan must be

causing China to accumulate FX reserves

according to monetarists,

changes in the money supply are the primary cause of changes in the price level.

Traditionally, the Federal Reserve can give emergency loans only to

commercial banks

To keep high inflation from eroding the value of money, monetary authorities in the United States

control the supply of money in the economy.

The formula for present value allows investors to

convert a given number of dollars in the future into its present equivalent.

Refer to the diagram and assume that prices and wages are flexible both upward and downward in the economy. In the extended AD-AS model,

cost-push inflation would involve first a leftward shift of curve C, then a rightward shift of curve C.

In the real-business-cycle theory,

declines in real output cause declines in the money supply and thus aggregate demand.

Suppose that Econland adopts a fixed exchange-rate system and pegs the value of its peso to the U.S. dollar. If Econlanders' demand for dollars increases in the foreign exchange markets, then Econland's foreign-exchange reserves will

decrease

A bond with no expiration has an original price of $10,000 and a fixed annual interest payment of $1,000. If the price of this bond increases by $2,500, the interest rate in effect will

decrease by 2 percentage points.

If there is an unanticipated increase in aggregate demand, then according to new classical economics, the economy will self-correct with a(n)

decrease in short-run aggregate supply, so output returns to its initial level but the price level rises.

Refer to the Laffer Curve. A cut in the tax rate from T2 to T1 would

decrease tax revenues and support the views of mainstream economists.

An increase in the dollar price of the British pound will

decrease the pound price of dollars.

A federal funds rate reduction that is caused by monetary policy will

decrease the prime interest rate.

Other things equal, an excessive increase in the money supply will

decrease the purchasing power of each dollar.

New classical economists say that an unanticipated decrease in aggregate demand first

decreases the price level and real output, and then increases short-run aggregate supply such that the economy returns to the full-employment level of output.

Refer to the diagram of the market for money. Given Dm and Sm, an interest rate of i3 is not sustainable because the

demand for bonds in the bond market will rise and the interest rate will fall.

A commercial bank can expand its excess reserves by

demanding and receiving payment on an overdue loan.

Karen holds a $100 bond that pays $10 per year in interest. The minimum price Karen would have to be offered before she would sell the bond

depends on rates of return she could earn on other, similar investments.

Portfolio diversification eliminates all of the ___________ from a portfolio.

diversifiable risk

A strategy that attempts to reduce the overall risk of an entire investment portfolio by investing in a variety of assets is called

diversification

A nation will neither export nor import a specific product when its

domestic price equals the world price

Refer to the diagram, which pertains to two nations and a specific product. Point G is the

domestic price for the nation represented by lines GB and GD.

Refer to the diagram for a specific economy. The shape of this curve suggests that

each successive unit of decline in the unemployment rate is accompanied by a larger increase in the rate of inflation.

Refer to the graph, which shows the domestic demand and supply curves for a specific product in a hypothetical nation called Econland. If the world price for this product is $2.00, then Econland will

export 200 units

Refer to the graph, which shows the import demand and export supply curves for two nations that produce a certain product. Lines 6 and 8 apply to one nation and represent, respectively,

export supply and import demand

If the world price of a product rises relative to the domestic price in a trading nation, then, for that product,

exports will increase and imports will decrease.

Suppose that, as expected, aggregate demand in the economy sharply declines. New classical economists say that the price level will _____________ and real output will ____________.

fall; remain constant

If the money supply rises from $600 billion to $800 billion and nominal GDP stays unchanged at $4,800 billion, then the income velocity of money

falls from 8 to 6

The intercept of the Security Market Line at any point in time is determined primarily by

federal reserve monetary policy

Refer to the diagram. The initial demand for and supply of pesos are shown by D1 and S1. Suppose the United States reduces its imports of Mexican goods, shifting its demand for pesos from D1 to D2. If the United States was operating under a system of exchange controls, the U.S. government would

find that, at the controlled exchange rate, pesos would be in surplus.

The Bretton Woods system of exchange rates relied on

fixed or pegged exchange rates, with occasional orderly adjustments to the rates.

The two pure types of exchange-rate systems are

flexible- or floating-rate and fixed-rate.

Which of the following lists of exchange-rate systems is arranged in proper historical order, from earliest to most current?

gold standard, Bretton Woods system, managed float

Alex wants to borrow $1,000 from Kara. If he repays the loan in one year, Kara will require him to pay 5 percent interest on the loan. If Alex wants to repay the loan over three years, but Kara strongly prefers present to future consumption, we would expect the interest rate on a three-year loan to be

greater than for a one-year loan

Commercial banks and thrift institutions

have become increasingly similar in recent years.

Refer to the diagram. The initial demand for and supply of pesos are shown by D1 and S1. Suppose the United States reduces its imports of Mexican goods, shifting its demand for pesos from D1 to D2. If the United States was operating under a fixed exchange rate system, the U.S. government would

have to increase the domestic supply of dollars to maintain the exchange rate at B.

new classical economists

hold that, left alone, the economy gravitates to its full employment level of output.

According to the Taylor rule,

if inflation rises by 1 percentage point above its target, then the Fed should raise the real federal funds rate by one-half a percentage point.

The accompanying table gives data for Country Y. Column 1 is the price of a product. Column 2 is the quantity demanded domestically (Qdd), and Column 3 is the quantity supplied domestically (Qsd). If the world price of the product is $6, then Country Y will

import 100 units of the product

Refer to the graph, which shows the domestic demand and supply curves for a specific product in a hypothetical nation called Econland. When the world price for this product is $0.50, Econland will

import 400 units

Refer to the diagram, which pertains to two nations and a specific product. In equilibrium, the nation represented by lines FA and FC will

import H from the country represented by lines GB and GD.

Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will

import copper

Refer to the diagram, which pertains to two nations and a specific product. Lines FC and GD are

import demand curves for two countries.

An idea from monetarism that has been absorbed into mainstream macroeconomics would be the

importance of the effects of changes in the money supply on the economy.

Suppose that Econland adopts a fixed exchange-rate system and pegs the value of its peso to the U.S. dollar. If people's demand for pesos increases in the foreign exchange markets, then Econland's foreign-exchange reserves will

increase

Assume that the required reserve ratio is 20 percent. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the excess reserves at Bank A and Bank B?

increase by $10,000 at Bank A, and decrease by $10,000 at Bank B

When a bank accepts a checkable deposit from a customer, its deposits will increase and its excess reserves will

increase by less than the deposits

In the curve, a decline in the tax rate from c to b would

increase tax revenue

According to the Laffer Curve, a cut in the tax rate from above the maximum-revenue rate to a rate lower than the maximum-revenue rate will

increase tax revenues

depreciation of the dollar will

increase the prices of U.S. imports, but decrease the prices to foreigners of U.S. exports.

A commercial bank has no excess reserves until a depositor places $2,000 in cash in the bank. The reserve ratio is 10 percent. The bank then lends $1,500 to a borrower. As a consequence of these transactions, the bank's excess reserves are

increased by $300

A commercial bank buys a $50,000 government security from a securities dealer. The bank pays the dealer by increasing the dealer's checkable deposit balance by $50,000. The money supply has

increased by $50,000

Other things being equal, an expansion of commercial bank lending

increases the money supply

An increase in the money supply is likely to reduce

interest rates

The purchasing power of money and the price level vary

inversely

One fundamental concept in financial economics is that an investment's rate of return is

inversely related to the price paid for it

According to mainstream macroeconomists, U.S. macro instability has resulted from

investment "booms" and "busts" and, occasionally, adverse aggregate supply shocks.

The purchasing power of the dollar

is the reciprocal of the price level.

A nation's export supply curve for a specific product

is upsloping

Which line in the graph would best illustrate the asset demand for money curve?

line 1

Refer to the graph. Which of the three Security Market Lines depicts the situation where investors most dislike risk?

line C

A banker must strike a balance in the pursuit of two conflicting goals: profits and liquidity. In terms of asset management, this translates into achieving a balance between holding

loans and securities on one hand and reserves on the other.

The last few years of the 1990s in the United States were characterized by

low inflation and low unemployment

Which system would be accompanied by occasional currency interventions by central banks to stabilize or alter rates to avoid persistent balance of payments deficits or surpluses?

managed floating exchange rates

The current monetary system for conducting international trade is usually described as a system of

managed floating exchange rates.

The Federal Reserve Banks are owned by the

member banks

According to the concept of the time value of money,

money is more valuable to a person the sooner it is received.

Some economists are concerned that the financial rescue provided by the TARP will encourage financial investors and firms to take on greater risks in the future. This is an example of

moral hazard

Refer to the graphs. Assume that the economy is initially at equilibrium where AD2 and AS intersect in Graph 1, and also assume that the economy is initially at point C in Graph 2. If the government implements a contractionary or restrictive policy, it would make the economy in graph 2

move from point C to point D.

Refer to the graph. The economy is at point B2, and then aggregate demand increases. In the short run, the economy will

move to point C2 and in the long run move on to B3.

Coordination failures occur when people lack some way to jointly coordinate their actions to reach a(n)

mutually beneficial equilibrium

Starting in 2014, the European Central Bank (ECB), along with a few other central banks in Europe, implemented a strange monetary policy of

negative interest rates

The accompanying table gives data for Country X. Column 1 of the table is the price of a product. Column 2 is the quantity demanded domestically (Qdd), and Column 3 is the quantity supplied domestically (Qsd). If Country X opens itself up to international trade and the world-market price of the product is $3, then Country X will

neither export nor import the product.

The claims of the owners of a firm against the firm's assets are called

net worth

The short-run aggregate supply curve illustrates the idea that if the price level falls, firms will experience

no change in input costs, so they will reduce their output level.

In which of the following situations is it certain that the quantity of money demanded by the public will decrease?

nominal GDP decreases and the interest rate increases

In terms of aggregate supply, the short run is a period in which

nominal wages and other resource prices are unresponsive to price-level changes.

The velocity of money is the

number of times per year the average dollar is spent on final goods and services.

The commercial banking system borrows from the Federal Reserve Banks. As a result, the checkable deposits

of commercial banks are unchanged, but their reserves increase.

Arbitrage causes all financial assets

of the same risk level to have the same average expected rate of return.

In a two-nation model, the equilibrium world price will occur where

one nation's export supply curve intersects the other nation's import demand curve.

The federal funds rate is the rate that banks pay for loans from

other banks

The goldsmith's ability to create money was based on the fact that

paper money in the form of gold receipts was rarely redeemed for gold.

In the absence of unexpected shocks, the economy will tend to experience

positive growth with mild amounts of inflation.

A bond that pays annual interest (or coupons) and a face value at maturity will fetch a price today that is equal to the

present value of its annual coupons and face value.

When there is inflation in the economy, it implies that the

price index is rising and the purchasing power of money is falling.

In the accompanying graph, point Y represents the

rate of return for the risk-free asset.

Which presidential administration is most closely associated with the economic policies of supply-side economics?

reagan

Suppose that the United States decides to fix the dollar-euro exchange rate. If the U.S. central bank observes that the quantity supplied of euros exceeds the quantity demanded of euros at the fixed exchange rate, to maintain the exchange rate, the U.S. central bank will

realize an increase in its reserves of euros.

Refer to the diagram and assume that prices and wages are flexible both upward and downward in the economy. In the extended AD-AS model,

recession would involve a leftward shift of curve A, followed by a rightward shift of curve C.

(Last Word) According to the research of Christina Romer and David Romer, tax increases implemented to reduce an inherited budget deficit

reduce real output by less than other tax increases.

Portfolio diversification

reduces the likelihood that the entire amount invested will be lost

When required reserves exceed actual reserves, commercial banks will be forced to have borrowers

repay loans

When a bank grants a loan to a customer who then keeps the funds in her checking account at that bank, the bank's

required reserves will increase

The Security Market line (SML) shows how the average expected rates of return on assets vary with

risk level

Refer to the graph. Assume that the economy is in initial equilibrium where AD1 intersects AS1. If there is an unanticipated decrease in aggregate demand to AD2, then, in the view of new classical economics, the economy will

self-correct through a shift in AS, which brings output back to Q1.

Prior to the mortgage debt crisis, the most frequently employed restrictive monetary policy tool was

selling bonds in the open market

The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for

setting the Fed's monetary policy and directing the purchase and sale of government securities.

Refer to the graph, which shows the supply and demand for British pounds. D1 and S1 represent the initial demand and supply curves. If there is a large increase in the number of American tourists visiting Britain because of a major event like the Olympics or the World Cup, then what should the British government do if it wants to fix the exchange rate at its initial level?

shift S1 to S3

Stagflation's demise during the 1980s resulted in a

shift in the Phillips Curve to the left.

Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $0.50, this nation will experience a domestic

shortage of 160 units, which it will meet with 160 units of imports.

Theoretically, during a financial crisis, the Fed is supposed to act as a lender of last resort to

solvent banks that are illiquid

Diversifiable risk refers to risk

specific to a particular investment

Monetarists believe the private economy is inherently

stable and that the government sector should be small.

Real-business-cycle theory suggests that changes in

technology and resources affect productivity, and thus the long-run growth of aggregate supply.

When a bank has a check drawn and cleared against it,

the amount of required reserves the bank must have will fall.

Which of the following would be the best brief definition of present value?

the current value of the expected future returns on an asset

In the 1990s and early 2000s, Japan's central bank reduced real interest rates to zero percent, but investment spending did not respond enough to bring the economy out of recession. Japan's experience is an illustration of

the liquidity trap

Which of the following varies directly with the interest rate?

the opportunity cost of holding money

Compound interest describes increases in value when interest is paid, or compounded, on

the original amount invested and previously accumulated interest payments.

Assume that, under a system of floating exchange rates, Mexicans decide to increase their investments in the United States. As a result,

the peso will depreciate and the dollar will appreciate.

If the purchasing power of the dollar is falling, then it follows that

the price index is rising.

The idea that freely floating exchange rates equate the buying power of national currencies is called

the purchasing power parity theory

To say that the Federal Reserve Banks are quasi-public banks means that

they are privately owned but managed in the public interest.

One reason why Europeans continued to leave money in their bank deposits, despite negative interest rates was

to continue using electronic payments

In the extended analysis of aggregate supply, the short-run aggregate supply curve is

upsloping and the long-run aggregate supply curve is vertical.

Export supply curves are __________________; import demand curves are ___________________.

upsloping; downsloping

Monetarists believe that

velocity is relatively stable

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes, respectively, the transactions demand for money can be represented by

vertical line

(Last Word) Solvent firms face the threat of bankruptcy during a financial crisis

when many assets are illiquid, making it difficult to make timely payments on debt.

If the price index rises from 100 to 120, the purchasing power value of the dollar

will fall by 1/6

Indy owns 100 shares of stock in Pet Mart Corporation that he purchased for $20 per share. Every year he has received, from company profits, $1 for each share he owns. If Indy holds his shares for five years, he

will have received $500 in dividends

If a nation exports a product, then the price of that product in the nation

will rise above the domestic (no-trade) equilibrium price.