test 4 econ

A__________is a situation in which withdrawals from a particular bank are substantially higher than usual.

bank run

Deposit insurance (such as FDIC) is a regulation designed to help prevent

bank runs

The primary purpose of a central bank is to conduct

monetary policy

When a central bank pays private banks interest on their reserves, this gives banks incentive to hold

more reserves and lend less

Banks in the U.S. often have deposit accounts at the Federal Reserve, and these accounts are part of the banks’ reserves.

true

Which of the following would lead to a decrease (leftward shift) in the demand for money?

decrease in real GDP

Why does the demand for money slope downward?

The interest rate is the opportunity cost of holding money.

Which is the interest rate at which banks borrow from and lend to each other?

 federal funds rate

Which is the interest rate at which banks borrow from the Federal Reserve?

discount rate

Which is a reason for why private banks tend not to use the discount window?

The discount rate is typically higher than the federal funds rate.

Bank reserves _______ when the Federal Reserve buys bonds through open market operations?

increase

Bank reserves_____when the Federal Reserve sells bonds through open market operations?

decrease

If a central bank sells government bonds through open-market operations what is a typical result?

Short-term interest rates will increase.

What represents the opportunity cost of holding cash?

interest rate

To increase aggregate demand the Fed can

engage in open-market purchases of Treasury bills

Which action would lead to a reduction in interest rates (in the short-run)?

increase the money supply

.Mike’s preferences are ___________if for any options A, B, and C within his choice set, If A is preferred to B And B is preferred to C then it must also be the case that A Is preferred to C.

transitive

Suppose Aretha prefers Pizza over Burgers, Ethiopian food over Chinese, and Pizza over Ethiopian. Assuming Aretha’s preferences are transitive, which is the most preferred option?

Pizza

The Mercer family’s dream house would require a $5,000 per month mortgage. They should consider buying this home only if their monthly income is greater than.

$15,000

_________wealth describes transferring wealth from one generation to the next.

generational

Suppose Jose’s gross pay for the week is $2,000. If $600 of that goes to taxes and deductions then what is Jose’s net pay?

$1,400

A rule of thumb is that about _______of income should be saved.

10%

If Amelia’s paycheck is $800, then how much of that should go toward savings?

$80

___________include(s) anything owned or that is owed to that person or organization.

assets

A ____________is a firm owned by stockholders who have purchased shares of the company.

corporation

A________is a firm owned by two or more people

partnership

Suppose Chang invested in a business with limited liability. If the company goes out of business and owes a $50,000 loan then what happens?

Chang is not responsible for any part of the loan.

Suppose Marigold is an owner of a business with unlimited liability. If the company goes out of business and owes a$20,000 loan then what happens?

 Marigold is responsible for paying back her share of the loan.

If the income tax rate on somebody earning $50,000 is 30% and the tax rate on another earning $80,000 is 20%, then income taxes are

regressive

The average tax rate paid on all taxable income is the tax rate.

effective

What is the effective tax rate on somebody who earns $50,000 if the marginal tax rate is 20% on income up to $40,000 and 40% on income over$40,000?

24%

The___________is paid to the insurer to have the insurance policy

premium

When using health insurance, a _____________is a specified amount of money the insured party pays when using certain medical services.

copay

.A__________is an amount of money the insured party must pay before the insurance company will start paying benefits.

deductable

_________refers to the acceptability of an individual or entity to an insurer as a potential policyholder.

insurability

Less risky parties are more__________and will typically pay lower premiums for insurance.

insurable

The nominal interest rate on___________is zero.

currency

A___________represents partial ownership of a company.

stock

Within a___________, funds are locked in for a specified time, earning interest, and there are penalties for withdrawing before the maturity date.

certificate of deposits

is the process of allocating wealth among a wide variety of investments and savings tools

Diversification

__________is the purchase of an asset with the hope that it might go up in value in the future.

 speculation

A_________is a situation in which an asset’s price increases far beyond intrinsic value or backing, often simply because people expect it to.

speculative bubble

Which asset or credit facility typically has the highest interest rate?

Credit cards

__________represents the annual percentage cost of borrowing money, including interest and fees such as underwriting, loan origination, and closing costs.

Annual Percentage Rate (APR)

With most credit cards, if one pays ____________each month then no interest will be charged.

the entire balance

Suppose the per period interest rate is 2%, the balance owed on a mortgage is $1,000 in period t, and the payment each period is $30. What will be the balance in period t + 1?

$990.00

Suppose the per period interest rate is 3%, the balance owed on a mortgage is $1,000 in period t , and the payment each period is $20. What will be the balance in period t + 1?

$1,010

During the early stages of paying back a loan, a larger part of the payment goes toward paying the _________compared to later stages of paying the loan.

interest

During the early stages of paying back a loan, a smaller part of the payment goes toward paying the_________ compared to later stages of paying the loan.

balance

If one pays extra on a loan payment (over the amount required to avoid default) the additional funds go toward paying down the____________ owed on the loan.

balance

What is the approximate value of the real interest rate on a certificate of deposit with a nominal interest rate of 3% if the inflation rate is 4%?

-1

What is the approximate value of the real interest rate on a government bond with a nominal interest rate of 5% if the inflation rate is 2%?

3

is a legal process for a person or business that is unable to pay debts.

bankruptcy

is a fraudulent investment operation that pays returns to its investors from their own money or the money of new investors, rather than from any actual profit earned.

ponzi scheme

is a type of market manipulation where influential individuals or groups artificially inflate the price of an asset, often resulting in a speculative bubble.

pump and dump