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Econ 312- Final Exam with complete solutions 2024_2025.
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Econ 312- Final Exam with complete solutions 2024_2025.
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Econ 312- Final Exam with completesolutions 2024/2025
1. Open Mkt Operations of buying/selling government securities (Major)
2. Reserve Ratio Major)
3. Discount Rate (Major)
4. Interest Rate paid on Fed's Reserves (Minor)
5. Term Faculty Auctions (not used much anymore) - ANSWER-Quantitative tools
of the Fed
1. Margin Requirements
2. Down Pmt requirements on home mortgages (20%)
3. Moral Suasion (not used much anymore) - ANSWER-Qualitative tools of the Fed
Dm = Dt + Da - ANSWER-Money Demand=
1. Transaction Demand
2. Asset Demand
3. Precautionary Demand - ANSWER-Components of Money Demand
Transaction Demand - ANSWER-function of income; (vertical straight line)
Asset Demand - ANSWER-function of real interest rates (Slanting left to right)
Precautionary Demand - ANSWER-function of unanticipated economic events
Ponzi Schemes - ANSWER-investments in which investors are unknowingly paid
returns directly from the investments made by new investors
, 1. Create a message of Hope of earning really high rates of return on some initial
investment
2. Using very creative accounting to "cover up" the true economics of what's
really happening
3. key to success is garnishing interest from a seemingly never-ending supply of
net participants - ANSWER-Ponzi Scheme Stages: (3)
Phillips Curve - ANSWER-suggests an inverse relationship between the rate of
inflation and the rate of unemployment
higher rates of inflation - ANSWER-Lower unemployment rates are associated
with :
Laffer Curve - ANSWER-depicts the relationship between tax rates and tax
revenues
tax revenues increase from 0 to some maximum level (at M) and then fall to zero -
ANSWER-Laffer: As tax rates increase from 0-100% :
Total Tax Return - ANSWER-Tax Base * Tax Rate
Tax Rate decreases ;
Tax Base increases - ANSWER-If Tax Revenue increases:
unemployment rate + inflation rate - ANSWER-Misery Index=
Misery Index - ANSWER-expresses the sum of the unemployment rate and the
inflation rate as a rough gauge of the economic discomfort that inflation and
unemployment jointly impose on an economy in a particular year
Fractional Reserve Banking System - ANSWER-only a portion of checkable
deposits are backed up by reserves of currency in bank vaults or deposits at the
central bank
Goldsmith Practices of long ago - ANSWER-Fractional Reserve Banking is based
on:
Money Multiplier - ANSWER-defines the relationship between any new excess
reserves in the banking system and the magnified creation of new checkable-
deposit money by banks as a group
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