Exercises – Topic 1 (Financial System and Role of Interest Rates) 1. What is produced and exchanged in the real sector? A. Money. B. Goods and services. C. Financial assets. D. All assets with a money price. 2. What is exchanged in the financial sector? A. Money only. B. Goods and services. C. All financial assets. D. All assets with a money price. 3. In a market economy‚ every real transaction has a corresponding: A. financial transaction. B. financial liability. C. real liability
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Practice Test # 3 Useful formulas/expressions: (1) MPC = ∆ C / ∆ DI or ∆ C / ∆ YD & MPC + MPS = 1 (2) Exp. Multiplier = 1/(1-MPC) ∆GDP = Exp Mult. * ∆AE (3) Δ AE = Δ Income * MPC (4) DD Multiplier = 1/rrr ∆DD = DD Mult. * ∆Reserves Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Long-run full-employment equilibrium assumes: a. a downward-sloping production function. b. a downward-sloping long-run supply curve (LRAS)
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adjustments to Fords three operations. In researching the economic forecaster ’s reports‚ Team B found the following the differences in the statistics: The Congressional Budget Office uses monthly data published by the Board of Governors of the Federal Reserve System to calculate two-year averages of nominal short and long term interest rates. The forecast of short term interest rates were compared using historical values for two measures of the interest rate on three- month treasury bills: the new-issue
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denominations of multiples of 100 Federal funds federal funds are overnight borrowings between banks and other entities to maintain their bank reserves at the Federal Reserve. Banks keep reserves at Federal Reserve Banks to meet their reserve requirements and to clear financial transactions. Transactions in the federal funds market enable depository institutions with reserve balances in excess of reserve requirements to lend reserves to institutions with reserve deficiencies. These loans are usually
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bank “The central bank is the head‚ the leader and the supervisor of the banking and monetary system of a country” History and Introduction of Central Bank Central bank is the most important bank of a country. Its importance increased manifold during past century. It is the symbol of financial sovereignty and stability of the country. It is the head of banking and monetary system. The principles on which a central operates are different from those of the commercial banks. It does not
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The Dodd-Frank Effect: The Insurance Industry Executive Summary The financial crisis of 2008 was cause by many factors within the United States financial system. Although the actions of insurance companies were not a key factor‚ they did adversely affect the industry and amplified the downward affect on financial markets. Insurance companies were adversely affected through the devaluation of their investments as a result of the collapsing mortgage market‚ depletion of capital‚ and increases in
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they were to go under. Due to this Congress has enacted many different pieces of legislation to prevent banks from failing. Some of the major pieces of legislation are The National Banking Act 1863‚ The Federal Reserve Act 1913‚ McFadden Pepper 1928‚ The Banking Act of 1933 (Glass Steagall Act)‚ Federal Deposit Insurance Corporation 1935‚ Riegle- Neal 1994 (repealed McFadden Pepper)‚ Gramm–Leach–Bliley Act 1999 (repealed Glass Steagall)‚ Dod Frank Act 2010. 2. What are the major sources of bank
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International Money and Banking: The FED and ECB. Banking Crises and their Consequences Banking Regulation Why start with banks? Banks play a key role in the financial system and in the economy. And‚ as we will see‚ monetary policy works largely through the influence that it has on the banking system. The banking sector played a key role in the financial market turmoil that generated the severe global recession of 2008-2009. Banking problems have also played a key role in the economic
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services produced‚ also known as economic output‚ within the U.S. during a specific time period (Mishkin‚ 2010). The total economic output is typically measured by GDP. The U.S. economy saw robust growth in 2004 and 2005 despite many issues including federal budget deficits‚ Hurricanes Katrina and Rita‚ Social Security reform‚ high oil prices‚ the looming housing bubble‚ and the Chinese exchange rate policy. The United States economy grew at an annual rate of 4.4% in 2004 and productivity growth is the
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Rational decision making-making decisions based on factual information and logical reasoning Marginal benefits/costs-additional benefits received when one more unit of a product is produced Specialization-the development of skills in a specific kind of work Voluntary exchange-the act of buyers and sellers freely and willingly engaging in market transactions Non-fraudulent exchange-the act of doing something on your own without someone forcing you to do it. exchanging goods‚ services‚ resources
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