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ECO 3132 Lecture Notes - Lecture 11: Circulating Capital, Commodity Money, Money Supply

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mauveraven347
12 Dec 2017
School
University of Ottawa
Department
Economics
Course
ECO 3132
Professor
Mario Seccareccia

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Document Summary

Problem with ricardos labour theory of value: the equality or proportionality is possible only under 2 conditions. If the creation of money comes from a rise in income, that is to say if everyones income rises =. Then the price of commodities will rise relative to commodity money. An increase in the money stock brings about a rise in prices. But that"s it a(cid:374)d depreciation of the exchange: yet hume recognized an alternative mechanism by which money enters the economic system whereby the increase in the money supply falls in the hands of a few financiers. In this case the effect would be first to reduce the elvel of interest to lead to an outflow of specie and to a fall in the exchange rate. Meaning a lower interest rate and stimulate investment, short run bigger output and long run higher prices. Adam smith: because the international prices of gold when demand increase international gold will be attracted increasing supply.

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Related Questions

Question 1

The higher the capital utilization rate, the greater the depreciation rate.

True
False

Question 2

Higher capital utilization rates may raise the user costs of capital because higher utilization rates imply

operating at inconvenient times.
paying overtime to employees operating the machines.
operating when complementary services like transporters are unavailable or more expensive.
All of the above.

Question 3

If the rental price of capital increase, the capital utilization rate

increases.
decreases.
remains the same.

depends on whether the substitution rate is greater than the income effect

Question 4

The vacancy rate in the labor market is

the number of job openings divided by the number of unemployed people in the labor force.
the number of job openings divided by the number of workers in the labor force.
the ratio of open jobs to filled jobs.
the ratio of open jobs to the total number of jobs that employers want occupied.

Question 5

Unemployment can exist in a market clearing model if it takes some search time for workers to find jobs.

True
False

Question 6

A decrease in workers’ effective real incomes while they are unemployed will

lower the job finding rate and raise the expected duration of unemployment.
lower the job finding rate and the expected duration of unemployment.
raise the job finding rate and lower the expected duration of unemployment.
raise the job finding rate and the expected duration of unemployment.

Question 7

In the Barro model, the natural rate of unemployment is

positively related to the job separations rate.
zero.
fixed.
positively related to the job finding rate.

Question 8

If the interest rate increases, the real demand for money also increases

True
False

Question 9

Commodity money is money that has value because

of the intrinsic value of the commodity.
it is legal tender.
the government says so.
All of the above.

Question 10

High-powered money is

money held by business for investment.
total currency in circulation plus depository institution deposits at the Fed.
total currency in circulation.
government bonds held by the public and depository institutions.

Question 11

U.S. M1 money includes

currency held by the public.
checkable deposits.
traveler’s checks.
All of the above.

Question 12

U.S. M2 money includes

currency, time deposits, and government bonds.
savings deposits, small time deposits, and private bonds.
checkable deposits, savings deposits, and small time deposits.
retail money market mutual funds, small time deposits, and government bonds.

Question

Money is different from other assets like capital and bonds in that

money does not pay interest.
money has intrinsic value.
money is a better long term store of value.
All of the above.

Question

If a person’s income doubles, we expect their cash holdings to

double
more than double.
less than double.
decrease.

Question 15

Real money demand does not change when

nominal GDP changes.
the interest rate changes.
the price level changes.
All of the above.

Question 16

All else constant, the price level rises when the supply of money increases.

True
False

Question 17

If the nominal interest rate were to increase, then

money demand decreases and the price level increases.
money demand increases and the price level decreases.
the money supply and the price level would increase.
the money supply and the price level would decrease.

Question 18

Real money demand is a function of real GDP and the nominal interest rate.

True
False

Question 19

The real return on money is zero.

True
False

Question 20

If the expected inflation rate is 5% and the unexpected inflation rate is 4%, the actual inflation is

1%
9%
-1%
1.25%

Question 21

When the rate of growth of money is constant

the inflation rate equals the growth rate of money.
the nominal interest rate rises.
real money balances are declining.
All of the above.

Question 22

A decrease in the money growth rate in the market clearing model causes

a decrease in the nominal interest rate.
an increase in money demand.
a decrease in the price level.
All of the above.

Question 23

A decrease in the money growth rate in the market clearing model causes

an increase in the nominal interest rate.
an increase in money demand.
an increase in the price level.
All of the above.

Question 24

Under price level targeting the money supply becomes

neutral
endogenous
exogenous
predetermined

Q 25 During a recession, the interest rate falls tending to cause money demand to rise, but is at least partly offset by real GDP falling tending to cause money demand to fall.

True
False