ECON102 Midterm: Midterm Review #2

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magentaporcupine258

11 Nov 2016

School

University of Waterloo

Department

Economics

Course

ECON102

Professor

Joseph Dejuan

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ECON102 Full Course Notes

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Document Summary

Money is any commodity or token that is generally acceptable as a means of payment. A means of payment is a method of settling debt. The functions of money: medium of exchange an object that is generally accepted in exchange for goods and services. In the absence of money, people would need to barter (exchange goods and services directly for other goods and services). M1 currency and checking deposits held by individuals and businesses. M2 includes m1 plus all other deposits (non-chequable deposits and xed term deposits held by individuals ad businesses). Liquidity is the property of being instantly convertible into a means of payment with little loss of value. Because the deposits in m2 are liquid, they are counted as money, A depository institution is a rm that takes deposits from households and rms and makes loans to other households and rms.

Related Questions

1. Which of the following both increase the money supply?

an increase in the discount rate and an increase in the interest rate on reserves
an increase in the discount rate and a decrease in the interest rate on reserves
a decrease in the discount rate and an increase in the interest rate on reserves
a decrease in the discount rate and a decrease in the interest rate on reserves

2. In the U.S., the average adult holds about $3,700 in

currency.
wealth.
M1.
M2.

3. The measure of the money stock called M1 includes

wealth held by people in their checking accounts.
wealth held by people in their savings accounts.
wealth held by people in money market mutual funds.
everything that is included in M2 plus some additional items

4. When the Fed decreases the discount rate, banks will

5. Reserve requirements are regulations concerning

the amount banks are allowed to borrow from the Fed.
the amount of reserves banks must hold against deposits.
reserves banks must hold based on the number and type of loans they make.
the interest rate at which banks can borrow from the Fed.

6. When we say that trade is roundabout we mean that

people sometimes trade goods for goods.
trades require a double coincidence of wants.
currency is accepted primarily to make further trades.
people must spend time searching for the products they wish to purchase.

7. Values of Assets

Asset	Amount in $Billions
Small-time deposits	780
Large time deposits	1,700
Demand deposits	450
Other checkable deposits	370
Savings deposits	4950
Traveller's checks	5
Money market mutual funds	740
Currency	880
Miscellaneous categories of M2	50

Refer to Value of Assets. What is the value of M1 in billions of dollars?

1705
2485
6295
7075

8. In 1991, the Federal Reserve lowered the reserve requirement from 12 per cent to 10 per cent. Other things the same this should have

increased both the money multiplier and the money supply.
decreased both the money multiplier and the money supply.
increased the money multiplier and decreased the money supply.
decreased the money multiplier and increased the money supply.

9. Consider four survivors on an island.

Rupert	has machete	wants fishing spear
Amber	has cooking pot	wants fishing spear
Rob	has fishing spear	wants machete
Tom	has cooking pot	wants machete

Which of the following pairs of survivors has a double-coincidence of wants?

Rupert with Amber, and Rob with Tom
Amber with Tom
Rupert with Rob
None of the above is correct.

10. Economists use the term money to refer to

all wealth.
all assets, including real assets and financial assets.
all financial assets, but not real assets.
those types of wealth that are regularly accepted by sellers in exchange for goods and services.

crimsongrasshopper834

1.Money must be ________ which includes the fact that it should ________. (I think it's B?)

A. in physical form; not be transferable using electronic means
B. generally accepted as a means of payment; be recognizable and divisible into small parts
C. whatever is used in a barter system; transferable across countries' borders
D. backed by gold; not decrease in value over time
E. accepted as a means of payment across countries' borders; not be fiat money

2.When goldsmiths issued receipts to gold owners, and those gold receipts circulated while gold stayed in the goldsmiths' safes,

(I think it's E)

A. the gold receipts were considered money because they were used as a means of payment.
B. an infant banking system developed in sixteenth century Europe.
C. money was invented.
D. fiat money was created.
E. Both A and B are correct.

3.Which of the following statements are correct?

Congress does not play a role in making monetary policy decisions.
The FMC meets eight times a year to make monetary policy decisions.
The President of the United States appoints members and the Chairman of the Board of governors but has little other formal authority over monetary policy.

A. ii only
B. ii and iii
C. i, ii, and iii
D. i and iii
E. i,and ii

4.If Jose deposits $2,000 in his bank and the desired reserve ratio is 10 percent, what is the amount of new loans that the bank can make?

A. $200
B. $1,900
C. $1,800
D. $2,000
E. $2,200

5.In order to influence the interest rate, the Federal Reserve System can immediately adjust the

A. amount the government borrows.
B. taxes that citizens must pay.
C. reserves of the banking system.
D. inflation level.
E. unemployment rate.

6.The government collects tax revenue of $100 million and has $105 million in outlays. The budget balance is a

A. surplus of $105 million.
B. deficit of $5 million.
C. surplus of $100 million and a deficit of $105 million.
D. surplus of $5 million.
E. deficit of $105 million.

7.Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

(Might be B?)

A. The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
B. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
C. The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
D. Both equilibrium price and equilibrium quantity would increase.

8.The Consumer Price Index (CPI) measures the changes of the

A. prices paid by all businesses for a fixed market basket of production resources.
B. quantities of a fixed market basket of goods produced by businesses.
C. lowest prices paid by consumers for a fixed market basket of consumer goods and services.
D. prices paid by consumers and businesses for a fixed market basket of goods and services.
E. prices paid by consumers for a fixed market basket of consumer goods and services.

9.For which of the following individuals would the opportunity cost of going to college be highest?

(I think it's c)

A. a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball
B. a promising young mathematician who will command a high salary once she earns her college degree
C. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree
D. a student with average grades who has never held a job

ECON102 Midterm: Midterm Review #2

ECON102 Full Course Notes

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