ECON 402 Exam 1 || Already Passed.
Fiat Money correct answers Paper money that is not redeemable for a real commodity
Continental Currency correct answers supposed to be able to be redeemed for gold/ silver but
didn't hold much value. As war dragged on, they kept printing leading to inflation
Repressed Inflation correct answers Inflation combined with maximum price control laws
Legal Tender Law correct answers a law that requires that a certain currency be accepted in trade
or in payment of debts
Interest correct answers a payment made for borrowing money
Time preference correct answers the difference in value between satisfaction in the present, and
the exact same satisfaction in the future
Positive Time Preference correct answers the principle that goods are more valuable to us the
closer to us they are in time; satisfaction today is more valuable than the exact same satisfaction
in the future
Present Value Formula correct answers Future Value/ (1+ interest rate) ^ number of years
between the "present" and "future"
Nominal interest rate correct answers the interest rate that lenders actually charge, and borrowers
actually pay
= real interest rate + inflation rate
Real Interest Rate correct answers the interest rate measured in terms of purchasing power
= Nominal Interest Rate - Inflation rate
Bond (debt security) correct answers a promise to pay a certain amount of money at a certain
time
Face value correct answers the amount of money that a bond can be redeemed for on its maturity
date
maturity date correct answers the date on which a bond can be redeemed
Gresham's Law correct answers The principle that when the exchange rate between them is
fixed, bad (overvalued) money drives out good (undervalued) money.
Bimetallic Standard correct answers a monetary system in which a government recognizes coins
composed of both gold and silver as legal tender
The coinage Act of 1792 correct answers -ordered 3 different types of coins to be minted
, -Defined the US dollar was 371.25 grains of silver or 24.75 grains of gold (15:1)
-Supply of silver increased causing market value to decrease and lead to Gresham's law
Fractional Reserve Banking correct answers A banking system in which only a fraction of
deposits is backed by reserves
Insolvency correct answers when a bank cannot meet its customers' demands to withdraw money
(bank failure)
A bank run correct answers when a large number of bank customers all attempt to withdraw their
deposits at the same time
Charter correct answers an authorization by the government to engage in a certain type of
business
Anti-branching Laws correct answers a law that prohibits banks from opening multiple branches
Restriction of competition
Limited diversification, increasing risk in the banking system
Increased the number of different banknotes in circulation
Central Bank correct answers A government organization that issues currency (prints money)
and regulates the banking system
Manumission correct answers A grant of legal freedom to an individual slave.
decision to vote formula correct answers (P ×NCD) + D > C
P= Probability of decisiveness: the probability that one person's vote will affect the outcome of
the election.
NCD= is the net candidate differential: the benefit to the voter of one candidate winning relative
to the other.
D= civic duty: the satisfaction that the voter gets from the act of voting itself (i.e. not from the
outcome, but from participating in the democratic process)
C= the cost of voting
Socialist calculation problem correct answers Without a price system you cannot make rational
economic decisions
Decisions are made corruptly or politically
Copy prices from other markets
The Plymouth Colony correct answers 1620
When pilgrims first arrived, it was a commune- no private property rights
Tragedy of the commons
Lack of incentives caused underproduction of goods, starvation (eating dogs/horses/ cats)
Fiat Money correct answers Paper money that is not redeemable for a real commodity
Continental Currency correct answers supposed to be able to be redeemed for gold/ silver but
didn't hold much value. As war dragged on, they kept printing leading to inflation
Repressed Inflation correct answers Inflation combined with maximum price control laws
Legal Tender Law correct answers a law that requires that a certain currency be accepted in trade
or in payment of debts
Interest correct answers a payment made for borrowing money
Time preference correct answers the difference in value between satisfaction in the present, and
the exact same satisfaction in the future
Positive Time Preference correct answers the principle that goods are more valuable to us the
closer to us they are in time; satisfaction today is more valuable than the exact same satisfaction
in the future
Present Value Formula correct answers Future Value/ (1+ interest rate) ^ number of years
between the "present" and "future"
Nominal interest rate correct answers the interest rate that lenders actually charge, and borrowers
actually pay
= real interest rate + inflation rate
Real Interest Rate correct answers the interest rate measured in terms of purchasing power
= Nominal Interest Rate - Inflation rate
Bond (debt security) correct answers a promise to pay a certain amount of money at a certain
time
Face value correct answers the amount of money that a bond can be redeemed for on its maturity
date
maturity date correct answers the date on which a bond can be redeemed
Gresham's Law correct answers The principle that when the exchange rate between them is
fixed, bad (overvalued) money drives out good (undervalued) money.
Bimetallic Standard correct answers a monetary system in which a government recognizes coins
composed of both gold and silver as legal tender
The coinage Act of 1792 correct answers -ordered 3 different types of coins to be minted
, -Defined the US dollar was 371.25 grains of silver or 24.75 grains of gold (15:1)
-Supply of silver increased causing market value to decrease and lead to Gresham's law
Fractional Reserve Banking correct answers A banking system in which only a fraction of
deposits is backed by reserves
Insolvency correct answers when a bank cannot meet its customers' demands to withdraw money
(bank failure)
A bank run correct answers when a large number of bank customers all attempt to withdraw their
deposits at the same time
Charter correct answers an authorization by the government to engage in a certain type of
business
Anti-branching Laws correct answers a law that prohibits banks from opening multiple branches
Restriction of competition
Limited diversification, increasing risk in the banking system
Increased the number of different banknotes in circulation
Central Bank correct answers A government organization that issues currency (prints money)
and regulates the banking system
Manumission correct answers A grant of legal freedom to an individual slave.
decision to vote formula correct answers (P ×NCD) + D > C
P= Probability of decisiveness: the probability that one person's vote will affect the outcome of
the election.
NCD= is the net candidate differential: the benefit to the voter of one candidate winning relative
to the other.
D= civic duty: the satisfaction that the voter gets from the act of voting itself (i.e. not from the
outcome, but from participating in the democratic process)
C= the cost of voting
Socialist calculation problem correct answers Without a price system you cannot make rational
economic decisions
Decisions are made corruptly or politically
Copy prices from other markets
The Plymouth Colony correct answers 1620
When pilgrims first arrived, it was a commune- no private property rights
Tragedy of the commons
Lack of incentives caused underproduction of goods, starvation (eating dogs/horses/ cats)
