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5 Written questions

5 Matching questions

  1. interest rate
  2. reserves
  3. determinants of investment
  4. contractionary fiscal policy
  5. FDIC (Federal Deposit Insurance Corporation)
  1. a created in 1933 and insures deposits in banks
  2. b annual interest payment on a loan EXPRESSED AS A % OF THE LOAN
    ex: $100 interest/$1000 bond = 10%
  3. c decr. G (or incr. T, decr. C) in order to decr. output/ rate of growth (in recession); affects goods market (AE, fiscal policy); decr. G= decr. AE2= decr. Y2= decr. MD= decr. r= incr. I= incr. AE3= incr. Y3
  4. d deposits that a bank has at the federal reserve plus its cash on hand; apprx. 1.5-2% held as vault cash
  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. a system in which banks keep less than 100% of their deposits available for withdrawal
  2. tendency for an increase in gov't spending to case reductions in private investment spending
  3. makes gov't spending multiplier smaller; incr. G=incr. AE=incr. Y= incr. MD= incr. r= decr. I= decr. AE= decr. Y
  4. MS<MD; at low interest rates ppl hold cash and sell bonds; decr. demand for bonds = decr. price of bonds = incr. interest rates
  5. incr. money demand = incr. interest rates and vice versa; proportional

5 True/False questions

  1. low interest ratesquantity of money demanded = high (hold cash)


  2. opportunity costvalue of what you give up; = interest


  3. links b/w goods and money marketmarket where goods and services are exchanged and the equilibrium level of the Aggregate Output (y) is determined


  4. bankruptcynegative net worth


  5. expansionary fiscal 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)