ECON 252 EXAM 3 QUESTIONS & ANSWERS
3 Functions of Money - Answer -Medium of exchange, sore of value, unit of account
Quantity Theory of Money - Answer -Money supply & nominal GDP grow a the same
rate in the long-run
Inflation Equation - Answer -Inflation rate = growth rate M2 - growth rate real GDP
How does a rising inflation rate affect interest rate? - Answer -Lowers the interest rate
What is seigniorage? - Answer -Government revenue from printing currency
How do you find real wage? - Answer -Nominal Wage / CPI
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
Properties of economic fluctuations - Answer -1. co-movement of macroeconomic
variables
2. limited predictability of turning points
3. persistence in rate of economic growth
Shifts in labor demand in Labor Market - Answer -1. changing output prices
2. changing output demand
3. changing tech and productivity
4. changing input prices
What is the real business cycle theory for driving economic fluctuations? - Answer -
technology influences changes in labor demand
What is the Keynesian theory for driving economic fluctuations? - Answer -changing
sentiments - animal spirits (psychological factors that influence mood)
What is the financial and monetary theory for driving economic fluctuations? - Answer -
decrease in money supply leads to lower labor supply
Okun's Law - Answer -change in unemployment = -.5 x (annual growth of GDP - 2%)
3 Functions of Money - Answer -Medium of exchange, sore of value, unit of account
Quantity Theory of Money - Answer -Money supply & nominal GDP grow a the same
rate in the long-run
Inflation Equation - Answer -Inflation rate = growth rate M2 - growth rate real GDP
How does a rising inflation rate affect interest rate? - Answer -Lowers the interest rate
What is seigniorage? - Answer -Government revenue from printing currency
How do you find real wage? - Answer -Nominal Wage / CPI
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
Properties of economic fluctuations - Answer -1. co-movement of macroeconomic
variables
2. limited predictability of turning points
3. persistence in rate of economic growth
Shifts in labor demand in Labor Market - Answer -1. changing output prices
2. changing output demand
3. changing tech and productivity
4. changing input prices
What is the real business cycle theory for driving economic fluctuations? - Answer -
technology influences changes in labor demand
What is the Keynesian theory for driving economic fluctuations? - Answer -changing
sentiments - animal spirits (psychological factors that influence mood)
What is the financial and monetary theory for driving economic fluctuations? - Answer -
decrease in money supply leads to lower labor supply
Okun's Law - Answer -change in unemployment = -.5 x (annual growth of GDP - 2%)
