Exam (elaborations)
ECS3701 Assignment 01 Semester 1 2023 Detailed Solutions
- Course
- Institution
This document contains suggested solutions & detailed explanations. For assistance call or .
[Show more]
1 review
By: 77mokone • 1 year ago
Seller
Follow
knowledgehut
Reviews received
Content preview
Monetary EconomicsECS3701
ASSIGNMENT 01 SEMESTER 01 2023
ASSIGNMENT 01 (compulsory)
20 MULTIPLE-CHOICE QUESTIONS
DUE DATE: 27 March 2023
UNIQUE NUMBER: 766123
QUESTION 1
A business cycle:
a. is the upward movement of the aggregate output in an economy.
b. is the upward and downward movement of the aggregate output in an economy.
c. involves borrowing from investors and lending to savers.
d. has no effect on economic performance.
The correct answer is (b)
Business cycles, the upward and downward movement of aggregate output (the total
production of goods and services), produced in the economy. When output is raising
unemployment decreases, when output is falling, unemployment increases.
Recessions are periods of declining aggregate output we see that the rate of money growth
has declined before almost every recession indicating that changes in money might be the
driving force behind business cycle fluctuations but not every decline in money growth is
followed by a recession.
, QUESTION 2
As the interest rate on bonds increases, the opportunity cost of _______ rises, money is
_______ and the quantity of money demanded _______.
a. holding bonds, more desirable, falls.
b. holding money, less desirable, increases.
c. holding money, less desirable, falls.
d. holding money, more desirable, falls.
The correct answer is (c) holding money, less desirable, falls.
The demand for money and the interest rate should be negatively related using the concept
of opportunity cost, the amount of interest (expected return) sacrificed by not holding the
alternative asset- the bonds. As the interest rate on bonds, i, rises, the opportunity cost of
holding money rises, and so money is less desirable, and the quantity of money demanded
fall.
QUESTION 3
Everything else held constant, a decrease in interest rates will cause consumer
spending on housing to ...
a. rise.
b. either rise or fall.
c. fall.
d. remain unchanged.
The correct answer is (a) rise.
A decrease in interest rates will make it cheaper for consumers to borrow money for a
mortgage to purchase a home. This makes housing more affordable for consumers, leading
to an increase in consumer spending on housing.
Lower interest rates can also make it more attractive for consumers to refinance their existing
mortgages, which can free up more disposable income to spend on housing or other goods
and services.
Therefore, all else being held constant, a decrease in interest rates will cause consumer
spending on housing to rise.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller knowledgehut. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.76. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
53022 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now