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5 Written questions

5 Matching questions

  1. required reserve ratio
  2. interest rate
  3. legal tender
  4. store of value
  5. commodity of money
  1. a has value in itself; itemse used as money that also have some intrinsic value
    ex: gold, cigarettes, cattle, candy bars
  2. b annual interest payment on a loan EXPRESSED AS A % OF THE LOAN
    ex: $100 interest/$1000 bond = 10%
  3. c an asset that can trasnport purchasing power from one time period to another; earn income in the present and spend it in the future
  4. d if Fed lowers RR - creates excess reserves and money supply; fed incr. RR then decr. excess reserves and money supply
  5. e money that a gov't has required to be accepted in settlement of debts; medium legitamacy

5 Multiple choice questions

  1. close substitutes for transactions money such as savings accountsand money market accounts
  2. anything that is generally acceptable to sellers in exchange for goods and services; accepted as a medium of exchange
  3. determined 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)
  4. market where financial instruments are exchanged and the equilibrium of the interest rate is determined
  5. everything in M1 and savings accounts, money market accounts, small CD's (under $100,000), and other "near monies"

5 True/False questions

  1. contractionary fiscal policydecr. 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


  2. moral suasionmarket where financial instruments are exchanged and the equilibrium of the interest rate is determined


  3. transaction motiveincr. prices = incr. MD (shift line right) and vice versa


  4. non-synchronization of income and spendingdecr. 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


  5. interestfee borrowers pay to lenders for the use of their funds