Econ 222 Essay

2267 Words Mar 12th, 2013 10 Pages
1. State and explain any two advantage of a monetary economy. State and explain any three functions of money. In monetary economy is an economy where goods and services are exchanged for money. It can avoid double coincidence of wants, for example, one person is willing to use a bag of rice to get a bag of tea; another person is willing to use a bag of tea to get two apples. These two parties can not trade easily for their goods because in a barter economy people have to find exact goods and services to trade with. People realized use money to purchase goods and services that will save more time to find exact goods and services they want, and convenient for people. The monetary economy also allows specializations, for example, many …show more content…
They gather all the small amount of savings to help firms and governments for investment, it also allows consumers optimal investment point to trade with lend or borrow, so that they may obtain points outside of the investment opportunity frontier that would be unobtainable because they would be straggle on the higher prices (lend or borrow) level if they invested efficiently by themselves.

4. Write short essays on the following four topics: A) Federal government budget constraint. B) Pension funds. C) Repurchase agreement. D) Mark-to-market arrangement for futures contract. Federal government budget constraint is defined by G = T + △B + △H. G defined government expenditures, T is taxes financing, △B is debt, and △H is inflation. When G = T + △B + △H; G – T = △B + △H, if G – T ﹥ 0, because government expenditures bigger than taxes revenue which the federal government budget deficit, it is also caused inflation when the government not budget to expand. When G – T ≤ 0, because government expenditures less than the tax revenue. If △B is not an available option then the government has to raise △H, it will cause inflation. Pension funds are depending on how long employee have been invest of their retirement funds; it is a common asset to generate stable growth over the long term, and provide pensions for employees when they reach the end of their working years and commence

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