Money and Banking
Give three example examples of commodity money
Gold, silver, salt and any valid options
Non-wage factors
Job satisfaction, job, security, career, prospects, fringe, benefits, working conditions, and traveling distance
Higher interest rates increase or decrease borrowing, spending and saving
borrowing; decrease
spending;decrease
saving; increases
Reward for capital
Interest
Formula for PED
Percentage change in quantity demanded / percentage change in price
What are 3 roles of a central bank
1. Lender of last resort
2. Acts as a bank to government
3. sets interest rates
4. Controls the monetary policy
5. issues notes and coins
What happens when large firms compete on price?
Quality may fall as a result of firms needing to reduce production costs to make a profit
Calculate TR: you sell 10 computers for 200 pesos?
2000
PPC formula
Loss/gain
state what is a demerit good
A non beneficial, harmful addictive good with a lack of information about this product. without any substitutes, making it inelastic.
How does the central bank reduce demand for demerit goods
By increasing taxation for the production and consumption of these goods.
+ By spreading information about the harmful side effects of this goods
Benefits of monopoly on consumers
Reliability, lower prices due to economies of scale, higher quality (generall), more investment in research and develop
What is the formula for average variable costs?
Variable costs / quantity
Define measure of value
Money provides a common way to measure and compare prices. It allows people to know how much something is worth.
State three determinants of PED
Number of substitutes, time period, proportion of income Spent on the good or service, luxury/ necessity
What is a cause and a consequence of external costs?
Cause: consumers and producers ignore the harmful impacts on third parties
consequences: overproduction, overconsumption and harmful effects on third parties
Disadvantages of monopoly’s
Inefficiency as there is no competition, lower wages, expectation of suppliers, less innovation
What is derived demand?
it’s when the demand for a good or service is directly dependent on the demand for a related good
why may labour not be mobile ?
Because workers may be unwilling and unable to move due to factors like culture, lenguage barriers, and personal preferences
Why are a sugary drinks inelastic for consumers?
An addictive good with very little substitutes
State all the functions of comercial and central banks
Central bank: acts as a lender of last resource, manages nations monetary policy, acts as a bank to the government, sets interest rates, issues notes and coins
Comercial bank: allows borrowing (creating accounts for credit and settlement of debts) and savings (deposits), serves the public, profit-seeking institution
Advantages of monopoly’s
Economies of scale, reducing the cost of production, less restored wastage, internal competitiveness, more investment in research and development
What does TIRES stand for in demand
T; tastes and preferences
I; income
R: price of related goods
E; expectations of future prices
S: size of market
State the functions of money and define them
Medium of exchange (money can be used as a medium to pay for goods or services), standard of deferred payment (money can be used to settle depts and pay in the future), store of value (money can be used in savings for a period of time without losing purchasing power), unit of account (price can be used to set and to compare prices)
A Dior t-shirt is demanded in a nation, the average wage in this nation decreases causing the supply of labour to decrease and the demand of labour to increase. What happens to the demand for the Dior T-shirt?
The demand for the T-shirt will decrease since the average total wage (income) decreased (spending decreases)