Econ 2301 MacroEconomics Unit 6-8 Review

The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of

the FOMC

In an economy there are $668 in currency, $303 in savings accounts, $387 in checking accounts, $128 in travelers checks, and $900 in small time deposits. What is M1?

$1,183

The same good sells for $10 in the US and for 81 Chinese Yuan in China. The real exchange rate between the US and China is 1.25. How many yuan does a dollar buy?

10.13

In France a loaf of bread costs 3 Euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

2.7/4 loaves of British bread per loaf of French bread

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

25 percent

It costs $4 in the US to buy a hamburger. Assuming purchasing power parity, what is the price of a hamburger in Japan (in Japanese Yen), if the nominal exchange rate is 10 yen per dollar?

40

The nominal exchange rate between US and France is .81 Euros per Dollar. The price of a good in France is 49 Euros. How many US Dollars does one need to be able to purchase this good in France?

60.49

Calculate the present value of $800 received 5 years into the future, if the interest rate is %5 per year

626.82

Calculate the future value 3 years into the future of $501 received today, assuming the annual interest rate is 8%.

631.12

According to the loanable funds model, which of the following events would result in higher interest rates and greater savings

Congress passes a reform of the tax laws that encourages greater investment

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve requirement.

It has $40,000 in deposits

Jerry has the choice of two bonds, one that pays 5 percent interest and one that pays 2 percent interest. Which of the following is most likely?

The 2 percent bond is a municipal bond, and the 5 percent bond is a U.S. government bond.

If the Apple corporation sells a bond it is

borrowing directly from the public

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures

capital investment

If you deposit $100 of currency into a demand deposit at a bank, this action by itself

does not change that money supply

If purchasing-power parity holds, a dollar will buy

enough foreign currency to but as many goods as it does in the United States.

Institutions that help to match one person's saving with another person's investment are collectively called the

financial system

A mutual fund

is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds.

If an economy uses silver as money, then that economy's money

is commodity money

A municipal bond is

issued by state and local governments

A central bank's setting (or altering) of the money supply is known as

monetary policy

International trade

raises the standard of living in all trading countries

Other things the same, an increase in the foreign price level

reduces the real exchange rate. This reduction could be offset by increase in the domestic price level.