Chapter 12: Money

Question 1

M1+ Definition

Answer 1

Currency outside chartered Banks, publicly held demand deposits

Question 2

M2 Definition

Answer 2

Non-Chequable notice deposits and personal term deposits at chartered banks

Question 3

Demand Deposits

Answer 3

Funds which depositors have immediate access too

Question 4

Notice Deposits

Answer 4

Funds requiring notice to access

Question 5

Term deposits

Answer 5

Funds kept unavailable for access for a specified term length

Question 6

Money Demand

Answer 6

Represents money Demand at all possible Nominal interest rates

Question 7

How is money supplied shaped, How does it change?

Answer 7

perfectly inelastic, straight line, it is changed by government choice on how they want money supply

Question 8

When is there a shortage and surplus of money on a equilibrium graph

Answer 8

surplus when demand is left of money supply, shortage when it is right

Question 9

What happens to money demand if nominal interest increases

Answer 9

The demand for money lessens, more people buy assets(bonds), and a surplus of money is created until the purchase of assets raises price and nominal interest is returned back to equilibrium

Question 10

If a perpetual bond is $20,000 and increases its interest rate from 2% to 5% How much is the bond worth now

Answer 10

$28,000, 3/5x increase in value