What is Money I
What is Money II
2008 Financial Crisis
Utility
GDP-I
GDP-II
100
What are the three primary functions of money?
Answer: Medium of exchange, unit of account, and store of value
100
Question: Which is more liquid: cash or savings account?
cash
100
Clue: A type of home loan often given to people with poor credit or low income.
What is a subprime mortgage?
100
This is the number of roller coaster rides that maximizes utility in the given quadratic function.
U(x)=−x2+6x
This is the number of roller coaster rides that maximizes utility in the given quadratic function.
Answer: What is 3?
100
Clue: This type of GDP measures the total value of goods and services produced in a country using current market prices.
What is nominal GDP?
100
The study of the economy as a whole. Its principle areas are: (1) GDP (2) Unemployment (3) Inflation (price level) (4) Business Cycle and (5) Growth
What is Macroeconomics
200
Which function of money solves the double coincidence of wants problem?
Medium of exchange.
200
Order from most liquid to least liquid: real estate cash, stocks, real estate
Cash, stocks, real estate
200
Clue: When borrowers stop making payments on their loans, it’s called this.
What is default?
200
Clue: This economic principle explains why utility begins to decrease after the third ride, due to rising discomfort.
What is diminishing marginal utility or diminishing returns
200
Clue: This version of GDP adjusts for inflation to show the value of output in constant prices.
What is real GDP?
200
This identity holds for the economy as a whole, because every dollar a buyer spends is a dollar of income for the seller
Income = Spending (expenditures)
300
Why is money considered a unit of account?
It provides a standard measure for prices and economic value.
300
Which is more liquid: a checking account or a certificate of deposit (CD)?
Checking account.
300
These financial products bundled together home loans and were sold to investors around the world.
What are mortgage-backed securities (MBS)?
300
This is the value of U(x) when the rider takes exactly 2 rides. U(x)=−1(x−3)2+9.
What is 8?
300
Economists use this measure to compare the cost of a standard basket of goods across countries, adjusting for price differences.
What is purchasing power parity (PPP)?
300
GDP equation for a closed, private, two-sector economy.
Y = C
400
How does money serve as a store of value?
It allows individuals to save and transfer purchasing power to the future.
400
Arrange from most to least liquid: savings account, cash, car.
Cash, savings account, car.
400
These deceptive practices tricked borrowers into taking loans they couldn’t afford.
What is predatory lending?
400
This mathematical term describes the overall shape of the utility function U(x)=−x2+6x
What is a parabola
400
If Country A’s nominal GDP grows by 8% but inflation is 5%, its real GDP growth is approximately this.
What is 3%?
400
Market in the circular flow diagram where households and sell firms their Labor, land, capital in return for income.
Markets for Factors of Production
500
What characteristic of money helps it function effectively in all three primary roles?
liquidity.
500
Arrange from most to least liquid: bond, checking deposit, house.
Checking deposit, bond, house.
500
These complex investments were made from different types of debt and were a key trigger in the crisis.
What are collateralized debt obligations (CDOs)?
500
This measure gives a better comparison of living standards between countries than nominal GDP.
What is GDP at purchasing power parity (PPP)?
500
GDP only includes these—they already embody the value of the intermediate goods used in their production
Final goods,
600
Is a gold coin an example of commodity money or fiat money
what is commodity money
600
The direct exchange of goods and services without using money.
What is bartering
600
This term describes a sharp rise in home prices fueled by speculation, followed by a market crash.
What is a housing bubble?
600
This GDP measure may exaggerate the wealth of countries with high inflation or volatile exchange rates.
What is nominal GDP?
600
What are the four components of the equation for GDP (Y).
§Consumption (C) done by Households
§Investment (I) done by Firms, capital investments e.g. purchases of machinery, buildings, new houses; not stocks, bonds, or equities
§Government Purchases (G) done by gov’t, schools, roads, national defense, computers, labor,
§Net Exports (NX) done by Foreigner, = exports-imports
700
How did money improve upon the bartering system?
It provided a common medium of exchange, making trade easier.
or
Specialization
700
Is modern paper currency an example of commodity money or fiat money?
fiat money
700
Investors used these to protect themselves in case borrowers defaulted—but they also increased systemic risk.
What are credit default swaps (CDS)?
700
The U.S. Bureau of Economic Analysis uses this type of GDP to compare the economy across time while removing the effects of inflation.
What is real GDP?
700
This is the difference between nominal GDP and real GDP.
Nominal GDP reflects the total value of goods and services produced in an economy at current market prices, while real GDP adjusts for inflation to show the value of goods and services in constant, or base-year, prices
800
the primary technology behind cryptocurrencies?
What is blockchain technology
800
What is the double coincidence of wants?
It requires finding someone who both has what you want and wants what you have.
800
This 2008 government program used taxpayer money to rescue banks during the crisis.
What is TARP (Troubled Asset Relief Program)?
800
This common product is often used in lighthearted examples to explain purchasing power parity across countries.
What is a Big Mac?
(Refers to The Economist’s “Big Mac Index”)
800
Use the definition of GDP to explain why leisure activities such are NOT included in GDP.
There is NO market value for leisure activities
900
Nearly all hyperinflation begins this way.
With governments printing "too much" money
900
Why is M0, M1, M2 or M3 not included in GDP?
because GDP measures the market value of good and services produced in a year. The mone is not a good or service it is an asset
900
This 2010 law increased regulation of Wall Street to help prevent future financial crises.
What is the Dodd-Frank Act?
900
If two countries have the same PPP-adjusted GDP per capita, their citizens can likely buy about the same amount of this.
What are goods and services?
900
Use the definition of GDP to explain why imported Italian-made Armani jeans sold in the USA are NOT included in the USA GDP.
These jeans are not produced in the USA and therefore are not counted in the USA's "domestic production
1000
If the money supply (M) is $2 trillion, nominal GDP (PY) is $10 trillion, and prices have remained constant, calculate the velocity of money (V) using the equation MV = PY.
What is 5?
(Explanation: V = PY ÷ M = $10T ÷ $2T =5)
1000
Clue: This term refers to companies whose collapse would cause massive harm to the entire economy.
What is “too big to fail”?
1000
This equation describes how to calculate real GDP from nominal GDP and a price index.
What is Real GDP = Nominal GDP ÷ Price Index × 100?
1000
Complete the following Circular flow Diagram (skip question 9)
7. T - G = 1042 - 1175 = -133
8. Y = 4628 + 1033 + 1175 -100 = 6736