Download Section 5 Guided Reading

Section 5 Guided Reading:
Module 22
1. Define Human capital
2. Define Physical Capital
3. Define Interest Rate:
4. What is the Savings-Investment Spending Identity?
5. In the Simplified Economy, what are the different formulas that justify the statement that
savings = investment spending?
a. Total income =
b. Total income =
c. Total Spending =
d. Consumer Spending + Savings =
6. What would be an example of investment spending?
7. Define the following terms:
a. Budget Surplus
b. Budget Deficit
c. Budget Balance
d. National Savings
e. Capital Inflow
f.
Capital Outflow
8. In which case would the Capital Inflow be a negative amount?
9. An increase in government budget deficit means that the government is doing what?
10. If government spending is less than net taxes, what is happening?
11. What is an example of a financial asset?
12. What is an example of a physical asset?
13. What are the 3 tasks of the financial system?
14. Name 1 liquid and 1 illiquid item.
15. What are the 4 types of financial assets?
16. What are financial intermediaries?
Module 23
1. What is money?
2. Define Currency in Circulation:
3. Define Money Supply:
4. What are the roles of money? And What does each role mean?
a.
b.
c.
5. What are the different types of money?
a.
b.
c.
6. Which measure of money is no longer used and when did it stop being used?
7. What are examples of near-moneys?
8. What type of money are dollar bills? Why?
9. When was there a break in the link between dollars and gold?
Module 24
1. Why is a dollar today worth more than a dollar a year from now?
2. What is the formula used to determine how much money will be gotten back after a loan is paid
with interest?
3. What is the present value?
4. What is the net present value?
5. Based on the FYI on page 241 - would it make more sense to take all of your earnings all at once,
or to receive payments over time?
Module 25
1. Why can’t a bank lend out off of the funds given to them by depositors?
2. What are bank reserves?
3. Loans are considered an ____________ for banks.
4. Customer deposits are considered _______________ for banks because
____________________________________________________________________.
5. What is the reserve ratio?
6. What decreases bank reserves?
7. What increases bank reserves?
8. What is the monetary base?
9. If the required ratio is 20% and the customer deposits $500 into a checking deposit, the
money supply will _________________ if the banking system does not hold any excess
reserves.
10. Draw the Venn Diagram of Monetary Base and Supply.
Module 26
1. What is the Federal Reserve?
2. When and why was it created?
3. Describe the financial crisis of 2008
Module 27
1. How does the FED increase the money supply?
2. How does the FED decrease the money supply?
3. Suppose that the reserve ratio is 10% when the Fed sells $11,000 of U.S. Treasury bills to the
banking system. If the banking system does NOT want to hold any excess reserves,
_________________ will be _________________ the money supply.
4. In the Open Market Operations by the Federal Reserve, What counts as assets and what counts
as liabilities?
Module 28
1. What is the opportunity cost of holding money?
2. What are short-term interest rates?
3. What does the money demand curve illustrate?
4. Draw the money demand curve.
5. What shifts the money demand curve?
6. What would decrease the demand for money?
Module 29
1. The rate of return =
2. Describe figure 29.1. What changes the quantity of loanable funds demanded?
3. Describe figure 29.2. What changes the supply of loanable funds?
4. In Figure 29.3 - which lenders will have their loan offers accepted? Who will not?
5. Real interest rate =
6. Describe interest rates in the short run & long run.