1-Consider an economy in which there's onefarmer who grows corn and another farmer whogrows sheep, and they engage in direct exchangeso that they consume both goods. Which of thefollowing is true?A-There is no money in this economy since it's abarter system.B-In this economy, only corn is considered money.C-In this economy, only sheep is consideredmoney.D-In this economy, both corn and sheep areconsidered money.

Barter system is an system which was used when there was no money and people used to exchange their…

Answered: 1-Consider an economy in which there's…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. Suppose the Bank of England (the UK's Central Bank) determines the reserve rate (rr) to be 15% and all banks should follow this rate when lending. (a) Using the fractional-reserve banking theory, calculate how much credit can be created in the UK economy if the initial loan is £300,000 and all created loans are deposited in another bank account and the number of banks involved in this process goes to infinity. (Show all your calculations) (b) Heterodox economists believe that while the theory of fractional-reserve banking brings the creation of credit by banks into the discussion of money supply, the theory suffers from the fact that the money supply is still exogenous. Explain this view through the relation between money supply (M) and the monetary base (H) discussed in the lecture.
Indicate whether each of the following statements is True or False. In each case, give a brief explanation for your choice. If there is no explanation, then NO mark will be awarded for that answer.Q.1.1Technology is always treated as a factor of production in economic theory.(2)Q.1.2An important aspect of using money in an economy is that the process of exchange, can take place without worrying about there being a double coincidence of wants.(2)Q.1.3It is common knowledge that debit cards and cheques are perfect substitutes for money.(2)Q.1.4Free market economies are generally considered to be efficient and fair.(2)Q.1.5The term economic rent refers to the returns received by government when people use government land.
What is money, according to Adam Smith? Is it an economic instrument that creates wealth, or inequality? Describe 1 argument and make explicit reference to an idea from The Wealth of nations?
6. Eurozone monetary policy True or False: All countries that are part of the eurozone are subject to the monetary policy imposed by the European Central Bank (ECB), and so each participating country has little control over the monetary policy implemented within its borders at any given time. Thus, any participating country must solve local economic problems with its own fiscal policies if an imposed monetary policy is ineffective. True False Consider the countries of Cyprus and Lithuania, both of which are part of the European Union and use the euro as their domestic currency. In 2017, Cyprus had an inflation rate of 0.68%, and Lithuania had an inflation rate of 3.72%. Suppose at the end of 2017, the European Central Bank (ECB) implements a monetary policy designed to slow economic growth in order to reduce inflationary pressure across the Eurozone. Given the inflation rates of Cyprus and Lithuania in 2017, Cyprus would benefit should consider using fiscal policy to solve its local…
Illustrate THREE (3) reasons why not all commodities are suitable to represent money. Please give explanation in details with examples.I
I only need Help with part (B)
3. Mike makes excellent cheesecake and Sue is very good at changing the oil in a car. Sue agrees to change the oil in Mike’s car if he makes her a cheesecake. This is an example of: legal tender. barter commodity money. fiat money.
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6. Monetary policy in the long run Consider a hypothetical economy that produces at its long-run macroeconomic equilibrium at a price level of 100. Suppose the real GDP of this economy grows at an annual rate of 2%. If the velocity of money is constant, the central bank can maintain the price level at 100 by means of which of the following? Expanding the money supply by 2% per year O Reducing the money supply by 2% per year les of O Keeping the money supply constant Suppose the central bank enacts an unanticipated restrictive monetary policy. As a result, the supply of loanable funds leading to a in short-term interest rates. The following graph shows the goods and services market of this economy at full employment. Assume that potential output remains constant. Adjust the graph to show the long-run effect of an unanticipated restrictive monetary policy on the goods and services market by dragging the 511 8/2/ aggregate demand (AD) curve, the short-run aggregate supply (AS) curve, or…
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4. The subprime mortgage market The financial crisis started with defaults-borrowers not repaying their loans-on subprime mortgages in the United States. Subprime mortgages have which of the following characteristics? Check all that apply. They have a higher likelihood of default. They are made to people with relatively poor credit history. They are made to people with relatively few assets. Subprime mortgages expanded to about 35% of all mortgages issued in the United States in 2004. Which of the following contributed to the growth of these mortgages? Check all that apply. Decreased regulation of the financial sector A shift to lower-risk investments by investors The Federal Reserve setting low interest rates in the early part of the 2000s The expectation that housing prices would keep rising

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