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ECO 4223 Test 1 exam solutions
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ECO 4223 Test 1 exam solutions
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ECO 4223 Test 1 exam solutionsA bond pays its ________ at the time of ________ . - ANS face value; maturity
Corporations issue stocks to - ANS raise funds for investments
Economists call the situation where one side of an economic transaction has more
information than the other - ANS asymmetric information
The problem of moral hazard arises when the seller of a security has - ANS little
incentive to behave prudently after selling its security
Financial markets are made up of people and firms that ________ assets. - ANS buy
and sell
Money serves an economy as a - ANS medium of exchange
unit of account
store of value
If the price of a guitar is 200 boxes of cereal in Kirk's Store and in Jimmy's Store the
exact same guitar can be purchased for 100 CDs, what is the price of one CD in terms
of cereal? - ANS two boxes
M1 equals - ANS currency + checking deposits + traveler's checks
Money demand is: - ANS the amount of wealth a person chooses to hold as money
Reindeer were once used as money in Finland. Using reindeer as money is an
example of: - ANS commodity money.
If firms believe the economy will begin to pick up in the future, the ________ of(for)
loanable funds will shift from ________ and the real interest rate will ________. - ANS
demand; D2 to D1; rise
If the interest rate is 5 percent and you put $100 into a savings account for 5 years,
what is the future value of today's $100? - ANS $127.63
The introduction of Internet banking has made it easier to transfer funds from one
account to the next. The result of this is that the ________ in Figure 4.3 shifts from
_________. - ANS money demand; D1 to D2
Consider the expectations theory of the term structure. Assuming that the short-term (1
period) interest rate today is 2 percent, and that the short-term (1 period) interest rates
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