macro test 3
Describe three types of short-run macroeconomic equilibrium. A macroeconomic equilibrium in which real GDP equals potential GDP is _____ equilibrium. And one in which real GDP exceeds potential GDP is _____ equilibrium.
a full-employment; an above full-employment
A financial institution is a firm that operates on both sides of the markets for _____: It _____ in one market and _____ in another.
financial capital; borrows; lends
Bonds issued by _____ are traded in the bond market.
firms and governments
A recessionary gap eventually emerges even if aggregate demand remains constant because over time ______.
potential GDP increases
What is net present value and how is it used in financial decisions? Net present value is the _______.
present value of all the future flows of money that arise from a financial decision minus the initial cost of the decision
The quantity of money that the banking system can create is limited by _______.
the monetary base, desired reserves, and desired currency holdings
10.2 Review Quiz 1 Question Help What does the aggregate demand curve show? What factors change and what factors remain the same when there is a movement along the aggregate demand curve? The aggregate demand curve shows the relationship between the quantity of real GDP demanded and ______ when everything else remains the same.
the price level
A movement along the aggregate demand curve occurs if _______.
the price level changes and all other factors remain unchanged
The demand for loanable funds is the relationship between _____ demanded and the _____ when all other influences on borrowing plans remain the same.
the quantity of loanable funds; real interest rate
The supply of loanable funds is the relationship between _____ supplied and the _____ when all other influences on lending plans remain the same.
the quantity of loanable funds; real interest rate
When the price level in Mexico falls, _______
the quantity of real GDP demanded in Mexico increases
A government budget deficit _______ the real interest rate, increases ______.
raises; private saving, and decreases investment
The demand for loanable funds increases and the supply of loanable funds increases. As a result, the equilibrium real interest rate ______ and the equilibrium quantity of loanable funds ______.
rises, falls, or remains the same; increases
In the long run, the money wage rate ______, short-run aggregate supply ______, and the economy returns to a full-employment equilibrium
rises; decreases
Joe has a term deposit that pays 6 percent a year and its value after two years will be $2,000. What is the present value of Joe's term deposit? The present value of Joe's term deposit is
$1779.99
Consider a payment of $250, which will be made three years in the future. The interest rate is 4 percent. The present value of this payment is
$222.25
What is the present value of $250, three years in the future if the interest rate is 3 percent? The present value of $250, three years in the future if the interest rate is 3 percent is
$228.79
Tom took out a $5,000 loan to buy a boat at an interest rate of 5 percent a year. He plans to repay the loan after 2 years. How much will he have to pay? Tom will have to pay
$5513
Lori is a student who teaches golf on Saturdays. In a year she earns $40,000 after paying her taxes. At the beginning of 2017, Lori owned $2,000 worth of books, DVDs, and golf clubs and she had $3,000 in a savings account at the bank. During 2017, the interest on her savings account was $180 and she spent a total of $30,000 on consumption goods and services. There was no change in the market values of her books, DVDs, and golf clubs. How much did Lori save in 2017? What was her wealth at the end of 2017? In 2017, Lori saved $10,180 Lori's wealth at the end of 2017 was $15,180
10180 15180
If the monetary base increases by $1 million and the quantity of money increases by $2.5 million, then the money multiplier is _____.
2.5
Daisy loans Alfred $10,000 and a year later, Alfred pays Daisy $10,400. If the inflation rate during that year is 1.5 percent, what is the real interest rate that Alfred is paying to Daisy? The real interest rate that Alfred is paying to Daisy is _______.
2.5 percent a year
Michael, an Internet service provider, bought an existing business worth $200,000 on December 31, 2017. During 2018, his business grew and he bought $400,000 of new servers. The market value of his older servers fell by $100,000. What was Michael's gross investment, depreciation and net investment during 2018? Michael's gross investment during 2018 was Michael's depreciation during 2018 was Michael's net investment during 2018 was
400,000 100,00 300,000
Michael, an Internet service provider, bought an existing business worth $400,000 on December 31, 2017. During 2018, his business grew and he bought $200,000 of new servers. The market value of his older servers fell by $100,000. What is the value of Michael's capital at the end of 2018?k The value of Michael's capital at the end of 2018 is $
500,000
Describe the policy change that a classical macroeconomist, a Keynesian, and a monetarist would recommend for U.S. policymakers to adopt in response to each of the following events: a. Growth in the world economy slows. b. The world price of oil rises. c. U.S. labor productivity declines.
A classical macroeconomist and a monetarist recommend that taxes be kept low to avoid disincentive effects for all of the events and a Keynesian recommends active fiscal policy and monetary policy to offset all events.
Event 3 ______.
A. decreases aggregate demand
A government budget surplus _______ loanable funds.
C. increases the supply of
Which of the following is money?
Charlie's checking account deposit at the Bank of America.
Why are checks, debit cards, and credit cards not money? Choose the correct statement.
Checks and debit cards are not money. They are instructions to the bank to transfer money from one account to another. A credit card is not money. It is an ID card that allows you to take out a loan.
Choose the correct statement. A. In 2017 about 700 commercial banks operated in the United States. B. A benefit of a money market mutual fund is that shareholders can write checks on their accounts with no restrictions. C. Money market mutual funds represent 13 percent of M1. D. A bank's reserves are notes and coins in the bank's vault or in a deposit account at the Federal Reserve.
D. A bank's reserves are notes and coins in the bank's vault or in a deposit account at the Federal Reserve.
Choose the correct statement. A. A credit card is money because it allows you to take a loan at the instant you buy something. B. A check is money because while it is in circulation the quantity of money increases by the amount of the check. C. Currency is money and credit cards are money because they are means of payment, but deposits are not money. D. Deposits are money, checks are not money, and credit cards are not money.
D. Deposits are money, checks are not money, and credit cards are not money
Explain the flows of funds that finance business investment. Choose the correct statement.
Funds from household saving, the government budget surplus, and the rest of the world flow through financial markets and institutions to firms who borrow the funds for investment.
Krugman on Monetary and Fiscal Policy Nobel Laureate economist Paul Krugman has launched an all-out attack on the monetary policy actions and inactions of Fed Chairman Ben Bernanke. Bernanke has increased the quantity of money by historically large amounts and in mid-2012 was cautiously trying to determine whether more stimulation was needed. Krugman says Bernanke is too cautious and should print money faster and move the inflation rate upward. Krugman also wants Congress to cut taxes and increase spending. Sources: The New York Times, Washington Post, and other papers and blogs, April, 2012 Explain which macroeconomic school of thought Paul Krugman most likely represents in the views described above. Explain which macroeconomic school of thought supports Ben Bernanke's actions described above. Based on this news clip, Paul Krugman most likely follows the ______ school of thought and Ben Bernanke most likely follows the ______ school of thought.
Keynesian or new Keynesian; Keynesian or new Keynesian
Adding Up the Cost of Obama's Agenda In more than a year of campaigning, Barack Obama has made a long list of promises for new federal programs costing tens of billions of dollars. Obama has said he would strengthen the nation's bridges and dams ($6 billion a year), extend health insurance to more people (part of a $65-billion-a-year health plan), develop cleaner energy sources ($15 billion a year), curb home foreclosures ($10 billion in one-time spending) and add $18 billion a year to education spending. In total a $50-billion plan to stimulate the economy through increased government spending. A different blueprint offered by McCain proposes relatively little new spending and tax cuts as a more effective means of solving problems. Source: Los Angeles Times, July 8, 2008 Based upon this news clip, explain what macroeconomic school of thought Barack Obama most likely follows. Based upon this news clip, explain what macroeconomic school of thought John McCain most likely follows. Based on this news clip, Barack Obama most likely follows the ______ school of thought and John McCain most likely follows the ______ school of thought.
Keynesian or new Keynesian; classical or new classical
Geithner Urges Action on Economy Treasury Secretary Timothy Geithner is reported as having said that the United States can no longer rely on consumer spending to be the growth engine of recovery from recession. Washington needs to plant the seeds for business investment and exports. "We can't go back to a situation where we're depending on a near short-term boost in consumption to carry us forward," he said. Source: The Wall Street Journal, September 12, 2008 Which school of thought do you think Timothy Geithner most likely follows? Treasury Secretary Timothy Geithner most likely follows the _______.
Keynesian school of thought if he is recommending an active policy of tax cuts to combat the recession
M2 consists of _____ plus _____ and _____ deposits, _____, and other deposits.
M1; savings deposits; small time; money market funds
Which of the following is an example of financial capital?
Rachel has taken a loan to buy a new home.
Choose the correct statements. 1. Gum does not serve as money because it is not a good store of value. 2. Most people know the price of gum, so it could serve as money because it is a unit of account. 3. Because most people buy gum, it can be used as money because it is a useful tool in barter. 4. Gum does not serve as money because it is not generally accepted in exchange for goods and services.
Statements 1 and 4 are correct.
Which of the following statements illustrate monetary policy?
The Fed has raised the federal funds rate by 0.3 percent.
Which of the following statements illustrate fiscal policy?
The US government has proposed a hike in the corporate tax rate.
How can the change in U.S. wealth differ from U.S. saving?
The change in wealth includes changes in the prices of assets owned and saving excludes these items.
Using a commodity as money creates problems because ______.
a commodity is bulky and its value changes over time
Give some examples of monetary policy that decrease aggregate demand. Examples of monetary policy that decrease aggregate demand include ______.
a decrease in the quantity of money and an increase in interest rates
Does economic growth result from increases in aggregate demand, short-run aggregate supply, or long-run aggregate supply? Economic growth results from ______.
a growing supply of labor and increasing labor productivity, which increase long-run aggregate supply
If the money wage rate rises and potential GDP remains the same, does the LAS curve or the SAS curve shift or is there a movement along the LAS curve or the SAS curve? A rise in the money wage rate with no change in potential GDP creates ______.
a leftward shift of the SAS curve and no change in the LAS curve
Money serves the functions of _______.
a medium of exchange, a unit of account, and a store of value
Does inflation result from increases in aggregate demand, short-run aggregate supply, or long-run aggregate supply? Inflation results from ______.
a persistent increase in aggregate demand at a faster pace than that of the increase in long-run aggregate supply
Give some examples of fiscal policy that increase aggregate demand. Examples of fiscal policy that increase aggregate demand include ______.
an increase in government expenditure, a decrease in taxes, and an increase in transfer payments
The defining feature of the Keynesian view of macroeconomics is that the economy is ______.
arely at full employment
The Fed is the lender of last resort, which means that if _____ is short of reserves, it can borrow from the _____.
a bank; Fed
A type of _____ is a mortgage-backed security, which entitles _____ to the income from a package of mortgages.
a bond; its holder
Reserves consist of the currency in the _____ plus the balance on its _____ account at _____.
bank's vaults; reserve; a Federal Reserve Bank
The financial institutions that the G-20 might require to hold more capital are ______. The "capital" referred to in the news clip is ______.
banks and insurance companies; the institutions' own funds
A depository institution creates liquidity by ______.
borrowing short and lending long
How have depository institutions made innovations that have influenced the composition of money? Depository institutions have made innovations that have resulted in _______.
checking deposits at thrift institutions becoming an increasing percentage of M1
A stock market is a financial market in which shares of stocks of _____ are traded.
corporations
What are the functions of depository institutions? The functions of depository institutions include _______.
creating liquidity
Depository institutions provide four benefits, which are ______.
creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling risk
What are the main components of money in the United States today? The main components of money in the United States today are ______.
currency and deposits at banks and other depository institutions
We call the leakage of bank reserves into currency the currency drain, and we call the ratio of _____ to _____ the currency drain ratio.
currency; deposits
When Mexico decreases the quantity of money, Mexico's aggregate demand ______.
decreases and its AD curve shifts leftward
The following events have occurred at times in the history of the United States: 1. A deep recession hits the world economy 2. The world oil price rises sharply 3. U.S. businesses expect future profits to fall Explain the effect of each of the following events on aggregate supply and aggregate demand in the United States. Event 1 ______. Event 2 ______.
decreases aggregate demand; decreases short-run aggregate supply
The requirement to hold more capital can make financial institutions safer because by holding more capital, a financial institution ______.
decreases its risk of insolvency
Chinese Premier Wen Jiabao has warned Japan that its companies operating in China should raise the pay for their workers. Explain how a rise in wages in China will influence the quantity of real GDP supplied and aggregate supply in China. A rise in wages in China _______ .
decreases China's short-run aggregate supply and the quantity of real GDP supplied does not change
A rise in the wage rate _______.
decreases short-run aggregate supply and does not change long-run aggregate supply
A depository institution is a _______.
financial firm that takes deposits from households and firms
What are depository institutions? A depository institution is a _______.
financial firm that takes deposits from households and firms
Wages Rising Faster than Prices Paychecks in Kansas are growing, according to the U.S. Department of Labor. Jacqueline Midkiff, with the department's office in Kansas City, says the average overall increase across the board through the Midwest, is 1.9 percent over this time last year, while inflation grew at 1.4 percent for the same time period. Source: Kansas Public Radio, August 1, 2012 Explain how "the average overall increase across the board" wage increase will influence aggregate supply. The "average overall increase across the board" wage increase _______.
decreases short-run aggregate supply because it increases firms' costs
How does a change in the quantity of money change the interest rate in the long run? In the long run, an increase in the quantity of money _______ the interest rate.
does not change
If the price level and the money wage rate rise by the same percentage, what happens to the quantity of real GDP supplied? Along which aggregate supply curve does the economy move? If the price level and the money wage rate rise by the same percentage, the quantity of real GDP supplied ______ and there is a movement up along the ______ aggregate supply curve.
does not change; long-run
The price of a bond ______ and the interest rate in the short run ______.
falls; rises
The loanable funds market is the aggregate of all the individual _____ markets.
financial
How do households make saving decisions? The _______, the greater is the amount that a household decides to save.
greater a household's disposable income and the smaller a household's expected future income
A mortgage is a legal contract that gives ownership of a _____ to the _____ in the event that the _____ fails to meet the agreed loan payments (repayments and interest).
home; lender; borrower
A depository institution is a financial firm that takes deposits from _____.
households and firms
When Canada sets new environmental standards that require power utilities to upgrade their production facilities, Canada's aggregate demand _______.
increases
The Fed increases the quantity of money and all other things remain the same. Explain the effect of the increase in the quantity of money on aggregate demand in the short run. In the short run, aggregate demand _______.
increases because interest rates fall and it is it easier to get a loan to buy homes and large consumer goods
Starting from a full-employment equilibrium, an increase in aggregate demand ______, and creates ______ gap.
increases real GDP above potential GDP; an inflationary
A government budget deficit _______ loanable funds.
increases the demand for
If the price level rises and the money wage rate remains constant, what happens to the quantity of real GDP supplied? Along which aggregate supply curve does the economy move? If the price level rises and the money wage rate remains constant, the quantity of real GDP supplied ______ and there is a movement up along the ______ aggregate supply curve.
increases; short-run
Labor productivity is rising at a rapid rate in China and wages are rising at a similar rate. Explain how a rise in labor productivity and wages in China will influence the quantity of real GDP supplied and aggregate supply in China. A rise in labor productivity _______.
increases long-run aggregate supply and short-run aggregate supply
A central bank _______. A commercial bank _______
is a bank's bank; is a firm that takes deposits from households and firms
During a time of uncertainty, why might it be necessary for a bank to build up its liquidity? During times of uncertainty, it might be necessary for a bank to hold large cash reserves and to have a large percentage of its assets purchased by its own capital because ______.
its depositors may decide to make large withdrawals
FDIC insurance helps to minimize the cost of bank failure by _______.
limiting the loss of each deposit to amounts over $250,000
What are the three main types of markets for financial capital? The three main types of markets for financial capital are _______.
loan markets, bond markets, and stock markets
What is the quantity theory of money? The quantity theory of money is that in the _______, an increase in the quantity of money brings an equal percentage increase in the _______.
long run; increase in the price level
A government budget surplus _______ the real interest rate, decreases ______.
lowers; private saving, and increases investment
Depository institutions pool risk by using funds obtained from ______ depositors to make loans to ______ borrowers.
many;many
Something is money if it is a commodity or token that is generally acceptable as a ______.
means of payment
Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the _____ changes in step with the price level to maintain full employment.
money wage rate
Which of the following items are included as money in the United States today? Your Visa card is _______. U.S. dollar bills in your wallet are _______.
not money; money
Your loan to pay your college tuition is _______. The check you have just written to pay for your rent is _______.
not money;not money
saving is the amount of income that is ___ in net taxes or spent on ___ goods and services
not paid; consumption
Currency consists of _____.
notes (dollar bills) and coins
Why does the aggregate demand curve slope downward? The aggregate demand curve slopes downward because _______.
of the wealth effect and the substitution effect
Examples of physical capital are ______. Examples of financial capital are ______.
ovens used by Pizza Hut and lawn mowers used by Larry's Mowing; bonds issued by Wal-Mart and stocks issued by Boeing This is the correct answer. D.
wealth is the value of all the things that people
own
A stock is a certificate of _____ and claim to the _____ that a firm makes.
ownership; profits
Starting from a short-run equilibrium, when the Fed decreases the quantity of money, _______.
people enter the loanable funds market and sell bonds
How do depository institutions balance risk and return? Depository institutions balance risk and return by _______.
placing some funds into safe low interest-earning assets and other funds into high-interest risky assets
Keynesian macroeconomists recommend ______.
policies that actively offset changes in aggregate demand that bring recession
Monetarist macroeconomists recommend ______.
policies that keep taxes low to avoid disincentive effects that decrease potential GDP
Classical macroeconomists recommend ______.
policies that minimize the disincentive effects of taxes on employment, investment, and technological change
What are the defining features of Keynesian macroeconomics and what policies do Keynesian macroeconomists recommend? The defining feature of the Keynesian view of macroeconomics is that the economy is ______.
rarely at full employment
The crowding-out effect is the tendency for a government budget deficit to raise the _____ and _____ investment.
real interest rate; decrease
Aggregate demand is the relationship between the quantity of _____ demanded and the _____ when all other influences on expenditure plans remain the same.
real GDP; price level
Short-run aggregate supply is the relationship between the quantity of _____ supplied and the _____ when the money wage rate, the prices of other resources, and potential GDP remain constant.
real GDP; price level
The risk that a borrower, also known as a creditor, might not _____ is called credit risk or default risk.
repay a loan
Regulators Give Bleak Forecast for Banks Regulators said that they were bracing for an uptick in the number of bank failures. The Fed declined to comment on the health of specific companies but said that Wall Street firms have learned a great deal from Bear Stearns and have reduced leverage and built up their liquidity. Today, investment banks are stronger than they were a month- and-a-half ago. Source: CNN, June 5, 2008 Explain a bank's "balancing act" and how the over-pursuit of profit or underestimation of risk can lead to a bank failure. A bank's "balancing act" balances _______. The over-pursuit of profit or underestimation of risk can lead to bank failure because _______.
return against risk; some borrowers default and never repay, which can lead to bank insolvency
What determines the supply of loanable funds and what makes it change? The supply of loanable funds is determined by the _________. The supply of loanable funds changes when _______.
saving decisions of households, which are influenced by the real interest rate, disposable income, expected future income, wealth, and default risk; disposable income, expected future income, wealth, or default risk change
What are the defining features of classical macroeconomics and what policies do classical macroeconomists recommend? The defining feature of the classical view of macroeconomics is that the economy is ______.
self-regulating and always at full employment
A means of payment is a method of _____ a debt.
settling
Does the quantity theory correctly predict the effects of money growth on inflation? The long-run historical evidence and international evidence show us that the relationship between money growth and the inflation rate ______.
supports the quantity theory, but the correlation is not perfect
State the financial decision rule: If the net present value is positive _______ and if the net present value is negative _______.
take the action; do not take the action
When the price level, the money wage rate, and other factor prices rise by the same percentage, there is a movement along ______. Potential GDP ______.
the LAS curve; does not change
When the price level rises but the money wage rate and other factor prices remain the same, there is a movement along ______. The quantity of real GDP supplied ______.
the SAS curve; increases
Weak Dollar Helps Shrink Trade Deficit The United States trade deficit narrowed in May as exports climbed to records. Exports of American- made goods and services totaled $157.6 billion in May, a 0.9 percent increase from April. The declining value of the dollar relative to other currencies, especially the euro, is helping to make American exports cheaper and more attractive to foreign buyers. Growth in exports has been one of the few bright spots for the economy, which has been pounded by housing, credit and financial crises. Tax rebates also are energizing shoppers. The New York Times, July 12, 2008 Under what circumstances will aggregate demand increase? If aggregate demand remains constant explain why a recessionary gap will eventually emerge over time. Aggregate demand will increase if ______.
the effect of the tax rebates and the change in the foreign exchange rate outweigh the effect of the housing, credit, and financial crises
Requirements to hold more capital make banks safer because _______.
the requirement to hold more capital makes the possibility of failure less likely
What is the distinction between gross investment and net investment? Gross investment is ______. Net investment is ______.
the total amount spent on new capital; the change in the value of capital
Physical capital is ______. Financial capital is ______.
the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services; the funds that firms use to buy physical capital
Depository institutions minimize the cost of monitoring borrowers by ______.
using specialized resources that have a much lower cost than what households would incur if they had to undertake the activity individually
The net present value is the _______ flows of money from a financial decision minus _____ .
value today of all future; the initial cost of the decision
In an economy, there is $100 million in currency held outside banks, $100 million in traveler's checks, $300 million in currency held inside the banks, $150 million in checking deposits, $400 million in savings deposits, $2,000 million in time deposits, and $600 million in money market mutual funds and other deposits. Calculate M1 and M2. The value of M1 is ______ and the value of M2 is ______.
$350 million; $3,350 million
Using a Federal grant of $150,000, a research lab buys equipment for $75,000 that has depreciated by $11,000 after two years. Calculate gross investment and net investment.
$75,000; $64,000.
If the annual interest paid on a $500 loan is $25, the nominal interest rate is _____ percent per year. If the nominal interest rate is 5 percent per year and the inflation rate is 2 percent a year, the real interest rate is _____ per year.
5; 3
Mexico trades with the United States. Explain the effect of each of the following events on the quantity of real GDP demanded and aggregate demand in Mexico. When the U.S. economy goes into a recession, ______.
Mexico's exports to the United States decrease, Mexico's aggregate demand decreases, and Mexico's AD curve shifts leftward
How do a decrease in transfer payments and a decrease in taxes change aggregate demand? Aggregate demand _______ when a decrease in transfer payments occurs. Aggregate demand _______ when a decrease in taxes occurs.
decreases; increases
Starting from a full-employment equilibrium, a decrease in short-run aggregate supply ______ the price level and ______ potential GDP.
increases; decreases real GDP below
How does an open market operation change the monetary base? An open market purchase ______ the monetary base. An open market sale ______ the monetary base.
increases; decreases
The increase in investment ______ aggregate demand. The decrease in government spending _______ aggregate demand.
increases; decreases
Wages Could Hit Steepest Plunge in 18 Years A bad economy is starting to drag down wages for millions of workers. The average weekly wage of private-sector workers has fallen 1.4% this year through September. Colorado will become the first state to lower its minimum wage since the federal minimum wage law was passed in 1938, when the state cuts its rate by 4 cents an hour. Source: USA Today, October 16, 2009 Explain how the fall in the average weekly wage and the minimum wage will influence aggregate supply. The fall in the average weekly wage rate ______ short-run aggregate supply and ______ long-run aggregate supply.
increases; does not change
Canada trades with the United States. Explain the effect of each of the following events on Canada's aggregate demand. When the government of Canada cuts income taxes, Canada's aggregate demand _______. When the United States experiences strong economic growth, Canada's aggregate demand _______.
increases; increases
Gross Domestic Product for the First Quarter of 2017 The increase in real GDP in the first quarter primarily reflected increases in personal consumption expenditures, exports, and investment. Government spending decreased. Source: Bureau of Economic Analysis, June 29, 2017 Explain how the items in the news clip influence U.S. aggregate demand. The increase in the personal consumption expenditures ______ aggregate demand. The increase in exports ______ aggregate demand.
increases; increases
The fall in the minimum wage ______ short-run aggregate supply and ______ long-run aggregate supply.
increases; increases
M1 consists of currency held by _____ and _____, _____, and _____ owned by individuals and businesses.
individuals; businesses; traveler's checks; checkable deposits
The federal funds rate is the _____ rate on _____ loans.
interest; interbank
Net worth is the total market value of what a financial institution has _____ minus the market value of what it has _____.
lent; borrowed
When potential GDP increases, ______.
long-run aggregate supply and short-run aggregate supply increase. The LAS and the SAS curve shift rightward
FDIC insurance brings _______ stability to the banking system because _______.
more; depositors know that money they have deposited with a bank will be repaid making bank runs less likely
Banks Ordered to Hold More Capital UK banks must hold more capital as their holdings of consumer debt soars. Source: The Guardian, June 27, 2017 What is the "capital" referred to in the news clip? How might the requirement to hold more capital make banks safer? The "capital" that is referred to in the news clip is _________.
owners' investment in the bank
The Federal Reserve (usually called the Fed) is the central bank of the United States, a _____ authority whose main role is the regulation of _____.
public; banks and money
The demand for loanable funds increases and the supply of loanable funds decreases. As a result, the equilibrium real interest rate ______ and the equilibrium quantity of loanable funds ______.
rises; increases, decreases, or remains the same
What are the defining features of monetarist macroeconomics and what policies do monetarist macroeconomists recommend? The defining feature of the monetarist view of macroeconomics is that the economy is______.
self-regulating and that it will normally operate at full employment, provided that monetary policy is not erratic and that the pace of money growth is kept steady
Explain the influence of the following events on the quantity of real GDP supplied and aggregate supply in India. When fuel prices rise _______. When the price level in India increases _______.
short-run aggregate supply decreases; the quantity of real GDP supplied increases
A bond is a promise to pay _____ sums of money on _____ dates.
specified; specified
