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Money and Banking

by: Junior Yost

Money and Banking ECON 310

Junior Yost
GPA 3.91


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Class Notes
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This 18 page Class Notes was uploaded by Junior Yost on Monday September 28, 2015. The Class Notes belongs to ECON 310 at George Mason University taught by Staff in Fall. Since its upload, it has received 8 views. For similar materials see /class/215204/econ-310-george-mason-university in Economcs at George Mason University.

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Date Created: 09/28/15
Agenda 0 Quiz 4 0 Instructions on Midterm 2 0 Practice Problems 0 EndofChapter Problems Midterm 2 39j o A calculator 0 One singlesided handwritten halfsize 8x 11 sheet containing notes Chapter 14 19 20 22 10 11 12 o Workout problems one computation problem from chpt 14 one word question from chpt 19 two graphical problems from chpt 22 Practice Problems The effect of an open market purchase on reserves differs depending on how the seller of the bonds keeps the proceeds If the proceeds are kept in iii the open market purchase has no effect on reserves if the proceeds are kept as 7 i reserves increase by the amount of the open market purchase A deposits deposits B deposits currency C currency deposits D currency currency If the Fed decides to reduce bank reserves it can A purchase government bonds B extend discount loans to banks C se government bonds D print more currency The Fed does not tightly control the monetary base because it does not completely control A open market purchases B open market sales C borrowed reserves D the discount rate The ratio of the change in aggregate output to a change in planned investment spending is cae A the marginal propensity to consume B autonomous consumer expenditure C the expenditure multiplier D unplanned inventory accumulation The money market is in equilibrium 7 A at any point on the IS curve B at any point on the LM curve C at only one point on the LM curve D only at the intersection of the IS and LM curves A negative supply shock causes iiii to A aggregate demand increase B aggregate demand decrease C shortrun aggregate supply decrease D shortrun aggregate supply increase iii is creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loans A diversification B arbitrage C computerization D securitization Explain and demonstrate graphically the effects of a negative supply shock in both the shortrun and longrun QampA Chapter 2 Huu39urxu An Overview of the Financial ECONOMICS M system Money BankingWK SzFinancial g 391 Markets Function of Financial Markets 0 Perform the essential function of channeling funds from economic players that have saved surplus funds to those that have a shortage of funds 0 Direct finance borrowers borrow funds directly from lenders in financial markets by selling them securities Function of Financial Markets o Promotes economic efficiency by producing an efficient allocation of capital which increases production 0 Directly improve the wellbeing of consumers by allowing them to time purchases better FIGURE 1 Flows of Funds Through x the Financial System x 39 Structure of Financial Markets 0 Debt and Equity Markets Debt instruments maturity Equities dividends 0 Primary and Secondary Markets Investment Banks underwrite securities in primary markets Brokers and dealers work in secondary markets Structure of Financial Markets 0 Exchanges and OvertheCounter OTC Markets Exchanges NYSE Chicago Board of Trade OTC Markets Foreign exchange Federal funds 0 Money and Capital Markets Money markets deal in shortterm debt instruments Capital markets deal in longerterm debt and equity instruments


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