Define the following terms and explain their importance to the study of macroeconomics:
a. money
b. M1
c. near money
d. bank run
What will be an ideal response?
a. Money is the standard object used in the exchange of goods and services. Therefore, money serves as the medium of exchange. Changing the amount of money in circulation is a tool of macroeconomics because money is a major determinant of aggregate demand.b. M1 is the narrowest definition of the money supply. It is the sum of all coins and paper currency in circulation, conventional checking accounts, traveler’s checks, and checkable deposits at banks and saving institutions. It consists of the most liquid (spendable) financial assets that can be used to make payments.c. Near money is a liquid asset that is a close substitute for money. However, it is not nearly as spendable as the items in M1. Some near monies include savings accounts and money market deposit accounts.d. A bank run occurs when many bank depositors attempt to withdraw their funds all at the same time. This can pose a danger for banks in a fractional reserve system because a bank usually does not have sufficient cash on hand to meet demands for withdrawals from all accounts.
You might also like to view...
In some countries it is time consuming and costly to establish ownership of property. Reforms to reduce these costs would likely
a. have no affect on either real GDP nor productivity b. raise real GDP and productivity. c. raise real GDP but not productivity. d. raise productivity but not real GDP.
On January 1, 2015, Anna invested $5,000 at 5Â percent interest for one year. The CPI on January 1, 2015 stood at 2.37. On January 1, 2016, the CPI was 2.40. The real rate of interest earned by Anna was ________ percent.
A. 5 B. 9 C. 3.7 D. -5
Restricting imports usually leads to
A) a country producing beyond its production possibilities frontier. B) a country consuming even further beyond its production possibilities frontier. C) a reduction in exports and employment. D) a higher per capita level of real consumption.
The principle of minimum differentiation
A) results in political parties proposing very similar or possibly identical policies. B) refers to the tendency of competitors to make themselves different in order appeal to the maximum number of clients or voters. C) explains why Burger King, Wendy's, and other fast food restaurants tend to locate far away from each other. D) None of the above answers are correct.