Principles Of Macroeconomics, Student Value Edition (11th Edition)
11th Edition
ISBN: 9780133023688
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 10, Problem 4P
To determine
How cigarettes became to be and worked as money between the world war prisoners.
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The Federal Deposit Insurance Corporation is at least partly to credit for which of the following?
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Discuss the concept of money from the perspective of a consumer and an investor.
A group of college friends decide to start their own bank, LSU Community Bank, in rural Pennsylvania. In order to get started they put in a total of $10 million of their own money and borrow $40 million from a venture debt lender. (This is known as venture debt lending.) They accept $160 million in deposits from households and businesses in the community, and, in turn, make $90 million in loans. They also purchase $95 million of mortgage-backed securities and keep the remainder of their assets as reserves at the Philadelphia Federal Reserve District Bank. a. Show LSU Community Bank's balance sheet. b. What is LSU Community Bank's reserve-deposit ratio? c. What is LSU Community Bank's asset to equity ratio?
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Principles Of Macroeconomics, Student Value Edition (11th Edition)
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- The Bring it Home Feature discusses the use of cowrie shells as money. Although we no longer use cowrie shells as money, do you think other forms of commodity monies are possible? What role might technology play in our definition of money?arrow_forwardA group of college friends decide to start their own bank, LSU Community Bank, in rural Pennsylvania. In order to get started they put in a total of $10 million of their own money and borrow $40 million from a venture debt lender. (This is known as venture debt lending.) They accept $ 160 million in deposits from households and businesses in the community, and, in turn, make $ 90 million in loans. They also purchase $ 95 million of mortgage-backed securities and keep the remainder of their assets as reserves at the Philadelphia Federal Reserve District Bank. a. Show LSU Community Bank's balance sheet. b. What is LSU Community Bank's reserve-deposit ratio? C. What is LSU Community Bank's asset to equity ratio? d. Suppose the housing market tanks and the market value of the bank's mortgage-backed securities falls by 10%. i. Show LSU Community Bank's new balance sheet. ii. By what percentage does the value of the bank's assets fall? iii. By what percentage does the value of the bank's…arrow_forwardWhat is the most likely effect of financial innovation and increasing real GDP, respectively, on the demand of money? A.) Increase; Increase. B.) Increase; Decrease C.) Decrease; Increase. D.) Decrease; Decrease E.) answer not givenarrow_forward
- Money plays a unique role in the financial system as the item used to buy goods and services. Money refers to as anything that is generally accepted in payment for goods or services or in the repayment of debts.  How does commodity money differ from fiat money? Discuss with an example of each.arrow_forwardBriefly explain different stages in the development of money?arrow_forwardAs a lender/depositor, how would you compare time to demand deposits?   Demand deposits are more liquid, but time deposits pay a higher interest rate   Demand deposits are more liquid, but time deposits pay a lower interest rate   Demand deposits are less liquid, but time deposits pay a higher interest rate   Demand deposits are less liquid, but time deposits pay a lower interest ratearrow_forward
- Differentiate between the real flow and money flowarrow_forwardEconomists use the term “money” to refer to Select one: a. all wealth. b. all financial assets, but not real assets. c. all assets, including real assets and financial assets. d. those types of wealth that are regularly accepted by sellers in exchange for goods and services.arrow_forwardThroughout history, all sorts of interesting things have been used as money, including fresh fish and cattle. Fresh fish is not an effective form of money. What essential characteristic of money does fresh fish lack that most makes it ineffective?arrow_forward
- Naked Economics: Undressing the Dismal Science Book by Charles Wheelan  Please refer to the chapter 10 titled, "The Federal Reserve," in the Naked Economics book to answer this question. Which of the below statements DOES NOT CORRECTLY capture the meaning of the word "money" as economists use the term, and as Charles Wheelan explains the term in this chapter? A) Whatever serves as money must be available in abundance, and must not be scarce.  B) It serves as a medium of exchange, something that facilitates trade and transactions.  C) It serves as a unit of account, so that the costs of all kinds of goods and services can be measured can be compared using one scale.  D) Whatever serves as money must be portable and durable.arrow_forwardThe following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 3% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. Suppose the Fed announces that it is raising its target interest rate by 75 basis points, or 0.75 percentage points. To do this, the Fed will use open-market operations to  (increase/decrease)  the  (demand for/supply for) money by (buying bonds from/selling bonds to) the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in the correct location. Place the black point (plus symbol) at the new equilibrium interest rate…arrow_forward
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