Saving and Investment
What is the equation for Savings?
What is an example of someone not in the labor force?
Retiree, stay-at-home parent, full-time student(not looking for work)
What is the definition of money?
set of assets in the economy that people regularly use to buy goods and services from others
What is the central bank of the United States?
The Federal Reserve
Money demand is (downward/upward) sloping
Choose 1
downward (since people need to hold more money when each dollar buys less)
What is the equation for present value?
Present value = future value/(1+r)^n
What makes someone considered unemployed?
They had to have looked for work in the last 4 weeks or are on temporary layoff or are waiting for the start of a new job
What is the equation for future value?
future value = present value x (1+r)^n
What is an example of commodity money?
Gold or silver
What does FOMC stand for?
Federal Open Market Committee
In the market for loanable funds, when demand increases, both saving and investment (increase/decrease)
Choose 1
increase because demand shifts right raising the quantity of loans but also raising the interest rate
Why do people pretend to be looking for work?
In order to receive unemployment compensation (since it is easy to fraud)
What is the most liquid asset?
Money
What is the use of fiat money?
Used as money by government decree with no intrinsic value
When a bank makes a loan, the money supply (increases/decreases)
Choose 1
increases (since the bank itself will be holding less money)
If T > G, this is considered a budget (surplus/deficit)
Choose 1
surplus
Describe a discouraged worker
Someone who wants to work but has given up searching for more than 4 weeks due to lack of success
the ease at which an asset can be converted into the economy's medium of exchange
What is the definition of demand deposits (or checkable deposits)?
Balances in bank accounts that depositors can access on demand by writing a check or using a debit card
The reserve requirement (or reserve ratio) is numerically represented as?
a percentage
When the government encourages savings, in the market for loanable funds, supply shifts (left/right)
Choose 1
right
Any of these:
minimum wage laws
unions
efficiency wages
What are the 3 functions of money? Name them
1-unit of account
2-medium of exchange
3-store of value
What is the definition of money supply?
quantity of money available in the economy
What are the 3 tools the Fed can use to change the money supply? (Name them only)
1-open market operations
2-changing the reserve requirement
3-changing the discount rate