ECON 252 Exam 3 Questions with Correct Answers (Grade A+)
Question 1: 3 Functions of Money
Answer: Medium of exchange, sore of value, unit of account
Question 2: Quantity Theory of Money
Answer: Money supply & nominal GDP grow a the same rate in the long-run
Question 3: Inflation Equation
Answer: Inflation rate = growth rate M2 - growth rate real GDP
Question 4: How does a rising inflation rate affect interest rate?
Answer: Lowers the interest rate
Question 5: What is seigniorage?
Answer: Government revenue from printing currency
Question 6: How do you find real wage?
Answer: Nominal Wage / CPI
Question 7: Shifts in demand curve for federal funds market
Answer: 1. economic expansion/contraction
2. changing liquidity needs
3. changing deposit base (bank's balance)
4. changing reserve requirement
5. changing IR paid by Fed for having reserves
Question 8: Properties of economic fluctuations
Answer: 1. co-movement of macroeconomic variables
2. limited predictability of turning points
3. persistence in rate of economic growth
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Question 1: 3 Functions of Money
Answer: Medium of exchange, sore of value, unit of account
Question 2: Quantity Theory of Money
Answer: Money supply & nominal GDP grow a the same rate in the long-run
Question 3: Inflation Equation
Answer: Inflation rate = growth rate M2 - growth rate real GDP
Question 4: How does a rising inflation rate affect interest rate?
Answer: Lowers the interest rate
Question 5: What is seigniorage?
Answer: Government revenue from printing currency
Question 6: How do you find real wage?
Answer: Nominal Wage / CPI
Question 7: Shifts in demand curve for federal funds market
Answer: 1. economic expansion/contraction
2. changing liquidity needs
3. changing deposit base (bank's balance)
4. changing reserve requirement
5. changing IR paid by Fed for having reserves
Question 8: Properties of economic fluctuations
Answer: 1. co-movement of macroeconomic variables
2. limited predictability of turning points
3. persistence in rate of economic growth
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