monetary regime - ANS-The __________________ regime refers to the institutions and
mechanisms that govern the supply of money and, hence, its purchasing power.
Bitcoin - ANS-_________________ is an unbacked digital currency that was launched in 2009
by the pseudonymous Satoshi Nakamoto.
100,000,000 satoshis (or sats) - ANS-1 bitcoin can be divided into
___________________________________________.
blockchain technology - ANS-When bitcoin was introduced, it offered a novel way to process
transactions via its ____________________________________.
not all dots connected - ANS-Explain decentralized.
all dots connected to a center point - ANS-Explain centralized.
all dots connected to each other - ANS-Explain distributed.
Proof of Work - ANS--Producing an appropriate hash is difficult.
-Miners have random chance of producing appropriate hash, which is determined by the relative
computing power they devote to system.
Proof of Stake - ANS--Producing an appropriate hash is easy.
-Miners have random chance of producing appropriate hash, which is determined by the relative
share of tokens they hold.
Transaction Request - ANS-Key Components of the Bitcoin Protocol:
-Designates public address of recipient
-Authorized with private key of sender
Blockchain - ANS-Key Components of the Bitcoin Protocol:
-Proof of work
-Consensus
Difficulty Adjustment - ANS-Key Components of the Bitcoin Protocol:
,- Ensures one block is added every 10 minutes on average
- Occurs every 2016 blocks
Blocked Reward - ANS-Key Components of the Bitcoin Protocol:
- Initially 50 BTC per block
- Cut in half every 210,000 blocks
the halving schedule. - ANS-Block reward is given by
________________________________________.
the difficulty adjustment. - ANS-Block speed is given by
_________________________________________.
block reward and block speed - ANS-Supply of bitcoin is determined by
______________________________________.
predetermined - ANS-Supply of bitcoin is ___________________________.
-Bitcoin is used for transactions
-Bitcoin has no alternative uses
-Bitcoin is costly to produce - ANS-Modeling Bitcoin as Money:
What are the 3 characteristics of the model economy?
-Demand for money
-Supply of money
-Marginal cost of production - ANS-Modeling Bitcoin as Money:
Our model will consist of what 3 curves?
1. demand to hold bitcoin.
2. less, more
3. a rectangular hyperbola - ANS-Modeling Bitcoin as Money:
1. The demand for money (DM) in this model economy is the
____________________________________________.
2. As before, people hold money to make transactions. As the purchasing power of money
(PPM) increases, proportionately ________ money is required to make the same transactions
and if it decreases proportionately ___________ money is required.
3. The demand for money is _________________________________________.
1. non-monetary use, just the total shock of bitcoin.
2. predetermined, unanticipated changes in money supply.
3. as if it were fixed. - ANS-Modeling Bitcoin as Money:
1. Recall that bitcoin has no ______________________________. Hence, the supply of money
(SM) is _______________________________________.
, 2. Since the supply of bitcoin is ________________________, there are no
________________________________________________.
3. We can treat the supply of money ____________________________.
1. the opportunity cost of bitcoin mining.
2. constant. - ANS-Modeling Bitcoin as Money:
1. The marginal cost of production (c) reflects
________________________________________________________________________.
2. To simplify the analysis, we assume the marginal cost of mining bitcoin is _______________.
1. the (p, B) combination, SM = DM = c.
2. (p1, B) - ANS-Modeling Bitcoin as Money:
1. Equilibrium in the model is expressed as __________________________ where
___________________.
2. For example, the economy is in equilibrium at _________________.
1. purchasing power increases from p1 to p2.
2. profitable, predetermined.
3. rises, eliminated. - ANS-Shocks to Demand:
1. Suppose demand for bitcoin increases from DM to DM'.
Immediately following the shock, _________________________________________.
2. Mining is more ___________________, but supply of bitcoin is _______________________.
Marginal cost of production ___________ until abnormal profit opportunity is
___________________.
1. purchasing power decreases from p1 to p2.
2. costs more than it is worth.
3. falls, unprofitable. - ANS-Shocks to Demand:
1. Suppose demand for bitcoin decreases from DM to DM'.
Immediately following the shock, _____________________________________.
2. Mining bitcoin now _____________________________________.
3. Marginal cost of production __________ until mining is no longer
_________________________.
- ANS-Lecture 14
bubble - ANS-A _________________ results when the price of an asset exceeds its
fundamental value—that is, what it is really worth.
worthless, a bubble. - ANS-The (sometimes implicit) claim of the bitcoin naysayers is that bitcoin
is ____________ and, hence, any positive price indicates it is a __________________.
almost certainly positive today - ANS-Maybe bitcoin will become worthless. But its fundamental
value is ______________________________________.
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