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Introduction to Macroeconomics > Week 16 Content > Flashcards

Week 16 Content Flashcards

1
Q

What is commodity money?

A

A good with intrinsic value, e.g. gold

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2
Q

What is fiat or token money?

A

No intrinsic value

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3
Q

What are the 4 key functions of money?

A

Medium of exchange, a unit of account, store of value, standard method of deferred payments

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4
Q

What is a monetary policy?

A

Use of IR, QE & the ER to manipulate the level of AD in an economy and improve macroeconomic performance

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5
Q

What is MO?

A

Notes, coins + banks reserves

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6
Q

What are the 3 things that M0 is known as?

A

Monetary base, narrow money & base money

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7
Q

What is M4?

A

Notes, coins, deposits at bank + building societies, includes time deposits

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8
Q

What is the difference between wholesale & retail deposit?

A

WD - deposits by large corporations

RD - regular customer putting money in the bank

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9
Q

What is the largest component in M4?

A

Deposits

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10
Q

What is liquidity?

A

The degree to which assets can be converted into the economy’s medium of exchange

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11
Q

Which is more liquid M0 or M4?

A

MO

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12
Q

What is known as asset yields?

A

When financial assets entitle the owner to a specified stream of interest payments

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13
Q

What kind of assets are treasury, commercial and local authority bills?

A

Short term

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14
Q

What are bonds?

A

Long term assets which pay fixed coupon payments per annum until redemption period

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15
Q

What are gilt-edged securities?

A

Gov bonds in the UK

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16
Q

What are perpetuities?

A

Bond with no fixed maturity date - pays interest forever

17
Q

What are the 2 ways that banks divide their funds?

A

Reserves and loans

18
Q

What is the reserve ratio formula?

A

Reserves/Deposits

19
Q

Excess Reserves formula

A

Actual reserves - Required reserves

20
Q

Are loans issued from excess reserves?

A

Yes

21
Q

What is the deposit multiplier?

A

Calculates how the increase in reserves leads to an increase in bank deposits

22
Q

Formula for deposit multiplier

A

1/R (reserves)

23
Q

Formula for money multiplier

A

M4/MO

Introduction to Macroeconomics (4 decks)

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