midterm 2 Flashcards
What is the most important initial step in the evolution of paper currency
The expectance of goldsmiths receipts
The “transactions demand” for money arises from the fact that
Households decide to hold money in order to make purchases of goods and services.
The major advantage of using money rather than barter is that
the use of money significantly reduces transactions costs
Which of the following examples constitutes a new deposit to the Canadian commercial banking system?
The bank of Canada buys government securities from a Canadian commercial bank
In any given year the governments debt service payments are
the interest payments on the outstanding stock of government debt
other things being equal, the purchasing power of money is
inversely related to the price level
economic growth is often associated with structural change in the economy and this change can present difficult policy challenges to governments, which of the following government policies would be most useful at addressing the social costs of economic growth?
Worker retraining and education program
Fiscal and mandatorie policies typically effect the short run level of gdp because they cause shifts in the _______ but they will not generally have any long run affects on real gdp unless they effect ___________
AD Curve ; the level of potential output
all else constant a decrease in the income tax rate will result in
an AE Curve with a steeper slope
excess reserves for a comercial bank
Any reserves (cash or deposits within the bank of Canada) that the bank holds over and above its desired reserves
the function of money in an economy is to serve as
1, a unit of account
2, a sore of medium
3, a medium of exchange
In a basic AD/AS macro model it is assumed that for any given interest rate the demand for money depends on the
level of real gdp and the price level
consider an open econonmy AD/AS macro model an expansionary fiscal policy will generally increase the governments budget ________ and also tends to ____________ and thus __________ net exports
Deficit; appreciate the currency; decrease
Doug is saving money in order to purchase a new snowboard next winter. this represents using money as
a store of value
when a government changes its fiscal policy, it is
changing government spending and or tax rates to change national income
the largest component of the liabilities of the bank of canada is
Canadian dollars in circulation
consider the aggregate production function Y=f(k,L) if the inputs K and L are increased by 5% each and the production function dsiplays constant returns to scale then total output will increase by _____ percent
5%
The difference between the governments debt and its deficit is that the debt is the
accumulation of past defficits whereas the deficit is the annual shortfall between revenues and disbursments
the present value of an asset is
the most someone would be willing to pay today for the asset
an example of an embodied technical change is
the replacement of old computer chips with new ones designed for faster processing.
if a person is holding money ofr the purchase of goods and services this demand for money is known as
transactions demand
it can be argued that a government budeget deficit rather than being a burden for future generations may provide net benefits to future generations this view is correct if the current budget deficit is used to
finance projects that deliver long term benefits to society
fiat money has value because it
is generally accepteded
