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5 Written questions

5 Matching questions

  1. interest sensitivity (insensitivity) of planned investment
  2. interest rate
  3. determinants of investment
  4. excess reserves
  5. legal tender
  1. a how responsive planned investment is to the interest rate; interest sensitivity = "I" responds a great deal to change in "r"; interest insensitivity = "I" responds very little to a change in "r"
  2. b difference b/w a bank's actual reserves and its required reserves; how much they can loan/ incr. money supply
  3. c money that a gov't has required to be accepted in settlement of debts; medium legitamacy
  4. d annual interest payment on a loan EXPRESSED AS A % OF THE LOAN
    ex: $100 interest/$1000 bond = 10%
  5. e interest rate, expectations about future sales, capital utilization rate, cost of capital relative to the cost of labor

5 Multiple choice questions

  1. incr. Y = incr. MD (shift line right)
    decr. Y = decr. MD (shift line left)
  2. central banking system of the U.S.
  3. decr. MS in order to decr. Y; decr. MS= incr. R= decr. I= decr. AE= decr. Y= decr. MD= decr. r= incr. I= incr. AE= incr. Y
  4. incr. money supply = decr. interest rates and vice versa; inversely proportional
  5. since market value of an interest bearing bond is inversely related to the interest rate; investors may hold bonds when the interest rate is high w/ hope of selling when rates fall

5 True/False questions

  1. opportunity costcombination of monetary and fiscal policy in use at a given time


  2. fractional reserve bankinga system in which banks keep less than 100% of their deposits available for withdrawal


  3. the optimal balancemoney that a gov't has required to be accepted in settlement of debts; medium legitamacy


  4. M1 (transaction money)main reason that people hold money to purchase goods and services (return vs. liquidity)


  5. expansionary monetary policydetermined by legislature once a yr; an incr. in gov't spending (G) or a reduction in net taxes (T) aimed at increasing aggregate output/ income (Y)


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