ECON-UA 1 Study Guide - Final Guide: Stock Market, Real Interest Rate, Real Wages

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6 Jul 2020

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An item buyers give to sellers when they want to purchase goods and services. A yardstick people use to pose prices and record debts. An item people can use to transfer purchasing power from the present to the future. These 3 functions distinguish money from other assets (stocks, bonds, real estate) Takes the form of a commodity with intrinsic value. Money without intrinsic value and used as money because of government decree. The quantity of money circulating in the economy. Demand deposits: balances in bank accounts that depositors can access by writing a check. Currency + demand deposits + traveler"s checks and other checkable deposits. M1 + saving deposits + small time deposits (less than 100,000) + balances in money market mutual funds, certificates of deposit. Banking system where banks keep a fraction of deposits as reserves, and use the rest to make loans. Reserve ratio: (total reserves / total deposits) x 100.

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QUESTION 21 2.5 points Save Answer The M1 measure of the money supply equals O paper money plus coins in circulation. O currency plus checking account balances. O currency plus checking account balances plus travelers checks. O currency plus checking account balances plus travelers checks plus savings account balances. QUESTION 22 2.5 points Save Answer If a person withdraws S500 from his/her savings account and puts it in his/her checking account, then M1 will_---and M2 will_- O increase; decrease O increase; not change O not change; increase O not change; decrease O not change; not change QUESTION 23 2.5 points Save Answer If the required reserve ratio is 10 percent, an increase in bank reserves of $1,000 can support an increase in checking account deposits in the banking system (including the original deposit) of up to $100. $1,000. $10,000. $100,000

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21. M1 includes currency(both paper and coin),checking accounts,traveler's checks(of non-bank issuers),demand deposits,other checkable deposits and negotiable order of withdrawl accounts(NOW). M1 doesview the full answer

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The M1 measure of the money supply equals paper money plus coins in circulation. currency plus checking account balances. currency plus checking account balances plus traveler's checks. currency plus checking account balances plus traveler's checks plus savings account balances.

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Based on the following information (which is in billions of dollars), the value of the M1 measure of the money supply is ____ and the value of the M2 measure of the money supply is ______.

Currency	20
Demand deposits	300
Money market mutual funds	800
Travelers' checks	10
Saving deposits	1,800
Other checkable deposits	200
Small-denomination time deposits	1,100

a. $530 billion; $3,700 billion

b. $330 billion; $4,230 billion

c. $520 billion; $4,320 billion

d. $530 billion; $4,230 billion

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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 workersâ 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

zero.

fixed.

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.

travelerâs 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 personâs income doubles, we expect their cash holdings to

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%

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

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

ECON-UA 1 Study Guide - Final Guide: Stock Market, Real Interest Rate, Real Wages

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