Questions and Problems

  1. Question

    DUifA7suaAObVklVf1pFTdYSWFmkPYWYZ3ud82gbqJzE6474GBb3pzLF2qCJ9u1PDrpsAuQzO/I=
    Prob 22 1. Describe the three functions of money.
  2. Question

    WPrXjXbr4AoTsGECidi5jat1KKWENPuZgNazF5dt5QW6GtYLJHoKxziYjqXguS+BfuPaDhypijW/Djpqe98Vht3+6P8wgFGTAW6/kV8IZQYhC7yAPw0mKIZ2w1SnhQ3qG11dWH6h9txdfnUSQdu0Pa6z00ibK8hst7RBsA==
    Prob 22 2. What is a barter economy? Describe why such an approach is a difficult way for a modern economy to exist.
  3. Question

    k2B37d08NHYO6bIVS45Rt90V89YkZJvZ/A3oNRdK0IOyHGJbEkgaVotzYZqzlEBy8kf8lJf1yi8U2Vjrl6ShfY5vuwY=
    Prob 22 3. Explain the important difference between M1 and M2.
  4. Question

    sxTynzQATeXdhz1iESTUWSr7ubXcCyKJfhWlB4sF5/CbG2MhiFZ7SkMDbVoeWlKjcozttP0OKOoDvt8CuDbKaegfdceEYLJKd3sMLFGIrdCS4fjwqqN9dKEYz9m1RTc0Z7R6+Q==
    Prob 22 4. What gives our money its value if there is no gold or silver backing the currency?
  5. Question

    P16d7hTHBkdNlLSrCx9uouyKcrSVEl29C0bwCwmP0cSaINOp1wC3vyAJ2f4UVRvX5Hjm1IyKEYqA5kx5QKayvDT4dx+nZUOyMBIZXPY8gAyaugIvqAX5ceQlsPpsH3+NNsUkZlUK6Jq87HkP2uXQJnQpMhk=
    Prob 22 5. What happens to savings if the real interest rate goes up? What happens to the demand for borrowing?
  6. Question

    9DcUNqJSFj14oJ73dE53ev9f8oVjADh+f4FIItTDSxjUqJQBwlFuDUIjMgjlSy8QYrVUI6eZOkAm6K7Aj7KyqzuVIhIegAcXxSpURq6LIYQkOprE
    Prob 22 6. Explain why bond prices and interest rates are inversely related.

Apply the Concepts

  1. Question

    3NnP6qBNMz1or/1jDHiRaET6+sSPhbClu/dvFrNHdWrIXqih1O5LarlFtW+cdIZ6IMeb9Kszlu8wfO/mKa7kwHa0qrTOctzm7XrE4j5pWzN+jX9VgVqCortrhJsQbcGiuJMD06VZUyH9g92Ur0YdsiAiznQ/AlJuwNtsZSAL+5pGXToytKSB7AnqQ+y7S4A5r9Ds21RIcBOyrb8m4VP9k/0zuKWEbUnZ7br0XLishN6/TmqTXvNv3GCHP6nBxSEwwRz3SHf1OzYktd4nleR9jYnVtrkQgqRGowlF1ydcbAisV37uYqF838uYQmeZj753vbkzm4YWCug=
    Prob 22 7. List the following assets from most liquid to least liquid: a house (real estate); cash; a one-carat diamond; a savings account; 100 shares of Google stock; a Harley-Davidson motorcycle; a checking account; your old leather jacket.
  2. Question

    P3wfGvpcJnV7YBgMUbrPzZZkT4fuIB6UuFT80IOOulPG5/1ZAwR/T0GI3Jrkv2TY1JnX4iXTRDizhZ4wbedvNWJ3OyQbp76VL9YE0Y37r6vXuicn5Oi8161jF/WuUHfFxp1vrMoMTiQYeEsL006ZNk8jXTHH+Drh6W2Lg3gvhyQNh1rbz8a3YIacgyBOojyqDz/cFaDpJXXmdW8aiyALnO97cF2OWOTgyq/sD5xMWsVXt3IyzIRi1ed53O80gccVisKsHIk+fOUhzGOTQdoW8h3JYYMZs19fZOWKkH9WdfX/sGrH5hfo92SeWlq+Nl+mo5+Q98I52zR0CxAQdgiyoGsw7c4qAt4lEQMvhEHzzjTw9MiaiP7znUFssQ1M2qpPNBaGL7WgQ0AkMDsAHt8p4w==
    Prob 22 8. At many game centers (such as Chuck E. Cheese’s), it is common for kids to play carnival-type games to win prize tickets, which are then redeemed for a variety of prizes based on the number of tickets earned. In what ways do these prize tickets illustrate the three functions of money?
  3. Question

    r16d865GUAnGViypCpjd4LspC3c44QSErXHGwRe1IWNgaPz1NevIj4GMNkBp8F1CCwCQt48vdrSAsdb+jxRfy2A7QV/RycR+2crL/574pHA07utJtfYrTWlke0E2ALDBKnVNMqVUZGhCrhzx8t/5Yrc0oZo8P39H84SCS7p6E1ZWQTirJyNDX9JpfHFiUmBUzQVrCqcCC6Gkf0I770LZ532vpb9afiTNXHaZuMFiGFquV/3ceJDSYw+DIxxXhLGyj7mZTA==
    Prob 22 9. How do recessions affect the market for loanable funds? What happens to the supply of savings? What happens to the demand for borrowing? What is the effect on real interest rates?
  4. Question

    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
    Prob 22 10. Most individuals with average wealth choose to save their money using a financial intermediary such as a bank or a mutual fund. However, individuals with greater wealth are more likely to invest in individual stocks or directly in new or existing businesses. Explain why persons of different wealth are likely to show differences in how they save, and how financial intermediaries play a role.
  5. Question

    GBEfamNxOKPa9Er6goHCW1NTSzgMrH4G6jQfwaoQ0TtKox5Y3R21NwrIPozkoth77BAUgq4ND4BdeLJwHNCtpHURuM4rDC5qJZFTV4RFNsn6hUKSQZU45ojw4M05bZHVFAc1SMqgH7NDEv4kAcF3ZuR6SW18kKoWK10pfHlBTcyahciG2OlRbOPNRYl3cWaZolvCEss7NQeeiCa39kCkiRxdTbr713RtUZWg6HQ0aFWxtjhxPyL6lvaOA1b2zQXet/gwdA==
    Prob 22 11. Why would it be better to put $1,000 each year into a retirement account than to wait ten years and put in $10,000 all at once? Would it make much of a difference in the long run?
  6. Question

    AP+Cvwp+JEBN+IUxije4cDmt8PKX/tRyshIQAyo8ULACOLcOO9YMyaBo4iYN39lfieKlyrK1NqTPbnFn98/PZwnfsJjtO8Txp3U3xCFQHWgs/zN4xELlAA9b3d7K68xVLax7vN2m0sY=
    Prob 22 12. Why have pensions become a less common form of retirement benefit offered by companies?

286

In the News

  1. Question

    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
    Prob 22 13. A proposal in the government budget set forth in 2013 placed a limit on the total amount of savings that can be accumulated in tax-preferred retirement accounts to about $3 million (U.S. News and World Report, April 10, 2013). The White House has argued that wealthy individuals have accumulated “substantially more than is needed to fund reasonable levels of retirement saving,” and that the tax deductions from these excess savings cost the government billions each year. How do these sorts of proposals affect the market for loanable funds?
  2. Question

    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
    Prob 22 14. At the trough of the last recession in 2009, major stock market indexes had dropped in half from their peak in 2007. This led many stock analysts to argue that bonds had outperformed stocks and also were safer investments. However, a report published by Morningstar Investment Management titled “Are Bonds Going to Outperform Stocks Over the Long Run? Not Likely” contradicted these analysts by comparing returns on stocks and bonds over periods of more than 40 years, and showing that stock returns easily beat those of bonds. Why would the argument that bonds perform better than stocks lead to a self-fulfilling prophecy if investors sell stocks and buy bonds? Which argument better reflects the theory of the tradeoff between risk and return?

Solving Problems

  1. Question

    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
    Prob 22 15. Suppose a small country has the following monies in circulation:Cash/currency: $1 millionDemand deposits: $2 millionOther checkable deposits: $2 millionSmall-denomination time deposits: $4 millionSavings deposits: $5 millionMoney market deposit accounts: $5 millionCalculate the value of M1 and M2 for this country.
  2. Question

    h0BvDPYECGjMpHb/nOtkWp3uuSE/lDYk0vbdyiCpCSVcxizWbDSpqz165kAWwu+S+hOiY8PQL1vn/T6BdYfQGbSa0kLXLA1J5hgVHx8M7lAJrx5mSkp5dzaSqabeVq6OuqcLDH3ft1l4aavm1dV3ZlYRjAyQVjMuQyKzUj54cJ1vMnRGFa2eVrpb+9XTbY673m7Ts8SrPT4tUGB25lhYP2iF98AsQ+Fd3qR5Kcl82GFQwB3JXizoUGwLqgmj9zKj7D8Z25A8wb8i0fDvOg8aE3FLJRo1GDcjdw/1VY/Wni4BYKv9ng0/VNhV9gI8zgPuQt+MqntafuJFksjtixjDvatOWNUeVXMXf6RG5BH5bTcvz9ckQQYrxg==
    Prob 22 16. Suppose you paid $1,000 for a perpetuity bond that pays $40 a year forever to the bondholder. Now suppose that due to aggressive policy by the Fed, general interest rates fall from 4% to 1%. What would be the price of the bond if it continues to pay $40 per year?

  1. Question

    BlBzqjIUG49U63dG6NdioziFdcbGndvadT3grftxoRGMUwaW5IXGjDLSAW8m8Trf1eEt1BHrGNZvQbRtPqLUGXrfO8LTfk0rWSV2WQ5R9w5UnFbNe7rHCwmWLtvQ9QiAkmC4asLEpMjvZVopUJ+2db4mOdtwVLTGj14xG22cys78XufICWTh/Z6CkpzTxah/9ATpPUgTq6gMghVzyl23pW/STeBwwcHFSUbI5jswCcIH52E+mtxtlyrJSnMdfzEWdOLrA/Rdk/hwHedlQfhNKNSDZ4jY13Yi
    Prob 22 17. According to By the Numbers, which bank had the largest amount of assets in 2012, and what was this value? How much in assets did a bank need to reach the top ten largest banks in the world in 2012?
  2. Question

    +6vtCK/D0Ym7EtZD6aNqWpwigM8xJ5qwik2aH9Fehh5KZ2PAWvEkcVDqs4+kpPYQTlMCTf9/DECOIHnhIKhlX9AXLq/oy2Ijx9Xcp46ly4XFvv7buK6j8FgEvE5D5pde70IvqqmB9yA/mCb7DdY7Q2G6GfDM66tHE4G9TmY5iwQZN9A0DOLYEGSgcCBDzoGVMPuF8F8JFxpTLEjM9JtAmKOaBBgnRMTQ8t7RfTyKP3Rd4bGu6tfVLkqYDP8QobxSAzyopVQVwiQxeDAVryQkFZndKJ1X/uqc+719cqJS/o4Vt0gVvL4d6SjEb9q8h6/X
    Prob 22 18. According to By the Numbers, how much in U.S. dollars is currently in circulation in the world? How much in U.S. dollars is held in reserves in the world? Describe how these numbers compare to the euro and the Japanese yen.