# Macroeconomics with Connect Plus

## Quiz 13 :Deficits and Debt: the Austerity Debate

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In what market are
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TheIn the above figure, quantity of

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The U.S. government has a monopoly on U.S. dollars. a. Could money be supplied privately? b. Has money ever been supplied privately? If so, how do you suppose people knew its value? (Austrian)
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Financial institutions are part of financial system of an economy, financial intermediary and depository institutions like banks, credit unions, etc. are part of it. Money is the most widely accepted medium of exchange
The money needs to perform three functions, which are as follows:
• Medium of exchange: The money should be widely accepted as medium of exchange for transactions to happen and it should not have any inherent value.• Store of value: The money should not• Unit of account: Money should have standardized value with respect to other goods and it should also be divisible.a.Even when governments were not there, money existed though its form was different. If money is being controlled by private players, then there might be some social problems but economically it will be benefit because the money supply will always be kept optimal. Austrian economists have always believed that people are more capable than the government.
b.The money can be supplied privately by going for a medium of exchange which satisfy the unit of account and store of value functions as well. Private players can create money if they are able to produce a medium which is widely accepted. The value of this medium or the money of the private players will be determined market exchanges and price-mechanism like of all other goods.

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Joe, your study partner, has just said that, in economic terminology, when he buys a bond he is investing. Is he correct? Why?
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Financial institutions are part of financial system of an economy, financial intermediary and depository institutions like banks, credit unions, etc. are part of it. Money is the most widely accepted medium of exchange
Whenever a person buys a bond then as per economics, the person is saving because he would be getting back the amount spent on the bond with some interest payments. In economics, investing means expenditure done on real assets.

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In what market are short-term interest rates determined?
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The chapter talks about the role that depositors and banks play in the "creation" of money. a. Do you think this role is consistent with the view that the money supply is only determined exogenously by the central bank? b. How could depositors and banks endogenously determine the money supply? (Post-Keynesian)
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While sharia (interest) is banned in Islam, profit-sharing is not. An Islamically sound banking practice could be a system in which depositors deposited money under a principle of profit-sharing and the bank provided funds on the same principle with a mark-up as payment for their financial services. a. How does this system differ from a system based on interest? b. How might the system of interest be exploitative and a system based on profit-sharing not be exploitative? (Religious)
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Money is to the economy as oil is to an engine. Explain.
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In Institutional economists' view, money not only serves as a medium of exchange, a unit of account, and a store of wealth, it also operates as an idea that shapes human understanding and interaction. Construct a list of examples during a day's interactions where money operates as an idea whereby people interact or attempt to understand a situation. For example, a friend might say, "Sherry is dating Herbert; she can do better than that!" (Institutionalist)
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Will there be too much or too little investment in the economy if the interest rate is higher than the rate that would equilibrate the supply and demand for
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Explain the effect of the following events on the interest rate in thea. Tax revenue isb. A significant number of people begin to use online banking services, allowing them toc. Economists begin to expect economic growth to pick up. In response, firms increase the amount they spend on capital goods.
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If financial institutions don't produce any tangible real assets, why are they considered a vital part of the U.S. economy?
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The Federal Reserve's Board of Governors is arguably the most powerful policy-making body in the United States. a. Since its inception, how many women have served on the Board of Governors? b. What do almost all of the current members of the Board of Governors have in common? www.federalreserve.gov/bios/boardmembership.htm (Feminist)
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If the government prints new $1,000 bills and gives them to all introductory students who are using the Colander text, who incurs a financial liability and who gains a financial asset? Essay Answer: Tags Choose question tag Economist Michael Bryan reports that on the island of Palau, the Yapese used stone disks as their currency. The number of stones in front of a person's house denoted how rich he or she was. a. Would you expect these stones to be used for small transactions? b. An Irish-American trader, David O'Keefe, was shipwrecked on the island, and thereafter returned to the island with a boatload of stones. If they were identical to the existing stones, what would that do to the value of the stones? c. If O'Keefe's stones could be distinguished from the existing stones, how would that change your answer to b ? d. An anthropologist described the stones as "a memory of contributions"-the more stones a person has, the more that person has contributed to the community. Could the same description be used to describe our money? Essay Answer: Tags Choose question tag How much is$50 to be received 50 years from now worth if the interest rate is 6 percent? (Use Table A13-1.)
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How much is \$50 to be received 50 years from now worth if the interest rate is 9 percent? (Use Table A13-1.)
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