Economics 304 Exam 2

Front 1

nominal interest-inflation interest equals what

Back 1

real interest rate

Front 2

if inflation is 8 percent then then breakeven interest rate would be?? and if you get 10 percent then??

Back 2

interest rate would be 8 percent, if you get 10 percent you are ahead 2 percent

Front 3

what is wealth

Back 3

total resources owned by an indivudial, including assets

Front 4

what is expected return

Back 4

return expected over the next period

Front 5

what is risk

Back 5

degree of uncertainty associated with the return

Front 6

what is liquidity

Back 6

the easy and speed with which an asset can be turned into cash

Front 7

LIQUID PREFERENCE FRAMEWORK WAS DEVELOPED BY

Back 7

JOHN MAYNARD KEYNES

Front 8

interest rate can be views as??

Back 8

the price one has to pay in order to get someone to willingly forego the advantages of liquidity

Front 9

what is equilibrium interest rate

Back 9

determined by the supply and demand for the money

Front 10

keyned assumed that..
1. money has a ...
2. money has a 0 rate of..
3. central bank controls...
4. as interested rates incrase, the opportunity cost of holding money increases because of...
5. at low or high interest rate ther eis a greater probablity of a ...

Back 10

1. zero rate of return
2. return
3. the amount of money
4. the opportunity cost of holding money increases ( foreone interest)
5. capital oss

Front 11

at an interest rate above the equilibrium rate there is an excess supsply of money and people will try

Back 11

buy bonds driving bond prices up and interest rates down

Front 12

at an interest rate belowthe equilibrium rate, there is an excess demand for money and people will try to..

Back 12

sell bonds, driving bond prices down, and interest reates up

Front 13

as income increases demand for money and equilibrium interest rates...

Back 13

increases, increase

Front 14

price increases demand for money, equilibrium interest rates
-both cause the transaction demand for money to

Back 14

increases, increase, increase

Front 15

money supply increases equilibrium interest rates...

Back 15

decrease

Front 16

a countinous increase in the Ms could lead to higher interest rates by...as long as its not a steady increase in money supply Ms should be...

Back 16

raising inflation..okay

Front 17

defualts in the subprime mortgages meant

Back 17

borrowers with weak credit records

Front 18

bank panic is...

Back 18

when multiple banks fail simultaneously

Front 19

ina panic, depostors fearing for the safety of their deposits not knowing the quality of banks loan portfolis withdraw their deposits to the point that..

Back 19

banks fail

Front 20

resulting decrease in the supply of funds available to to borrows leads to higher....
and further declines in lending and...

Back 20

interest rates, economic activity

Front 21

ability to bund these high-risk mortgages in a standardized debt security is called

Back 21

mortgage-backed securities

Front 22

blank.. provided a new source of financing for these high-risk mortgages

Back 22

mortgage backed securities

Front 23

development of subprime morgages helped raise us homeownership to..

Back 23

highest levels in us history

Front 24

when housing prices bvegan to fall in 07 to levels below the amount of the mortgage there was an incentive to..

Back 24

walk away from their homes

Front 25

to promote recovery act the subprime financial crisis of the economic recovery act authorized the treasury to spend 700 billion to purchase subprime mortgaeges assets this was called..

Back 25

tarp

Front 26

banks balance sheet is

Back 26

total assets equals total liabilities plus capital

Front 27

chedckable deposits is currently what percent of banks liabilities
reason is ..

Back 27

6.. more substitutions available

Front 28

non transaction deposits are what percent of bank liabilities

Back 28

53 percent

Front 29

interest paid on checkable and non transaction deposits account for what percent of total bank operating expense.. and cost of servicing accounds ( salaries, building rent) are what percent of operating expenses

Back 29

25.. 50

Front 30

discount rate is what percent
fed funds rate is what percent

Back 30

1/2, 1/4

Front 31

federal reserve is

Back 31

discount loans

Front 32

bank capital is what.. and what equation

Back 32

equity, assets minus liabilities

Front 33

reserves have what interest rate
reserves are held to meet resrve requirements set by

Back 33

no interest, the fed

Front 34

loans are what percent of banks assets and what percent of bank revenues are loans

Back 34

61, 50

Front 35

savings banks are...
credit unions are..

Back 35

residential mortgages, consumer loans

Front 36

what was created to help pay for the war.. too many were issued which made the what weak

Back 36

continentals, continental

Front 37

who was a key player of bank of the US

Back 37

treasury secretary alexander hamilton

Front 38

in 1791 congress issued a

Back 38

20 year charter

Front 39

when bank charter expired in 1811 bank of the us was not renewed becasue of

Back 39

distrust of centralized power

Front 40

in 1816 congress issued a blank charter of second banko f the us but was not blank.. after the 20 years

Back 40

20 year charter, renewed

Front 41

before 1863 it was all blank banks ( natoinal banking act of 1863) it was supervised by

Back 41

state, the office of the comptroller of the curency

Front 42

banking panic of 1907 resulted in the blank.. which president created it..

Back 42

federal reserve act of 1930.. woodrow wilson

Front 43

adjustable mortgage increases risk for blank..and decreases risk for..

Back 43

borrower, lender

Front 44

blank was the first nationwide credit cardd

Back 44

diners club

Front 45

balance sheet can be best stated by

Back 45

total assests-total liabilities= equity

Front 46

sum of vault cash and bank deposits with the fed minus required reserves is called

Back 46

excess reserves

Front 47

nominal interest rate is

Back 47

equal to the real interest rate plus inflation rate

Front 48

the discount rate is

Back 48

the rate which the fed charges on its loans to depository institutions

Front 49

if prices in the market for fine art becomes more volatile then

Back 49

demand curve for money shifts to the right and the interest rate rises

Front 50

more risky

Back 50

volatile

Front 51

long term capital gains are, currently taxed at a rate
-below
-above
-equal to
-depending on your income it can vary

Back 51

below

Front 52

using keynesian model. if income increases than the demand for money will..

Back 52

the demand for money will increase

Front 53

before 1980, when the market interest rate rose above the maximum rate set by q..banks...

Back 53

lost deposits

Front 54

3 examples of assets

Back 54

us. treasury securities
reserves
commercial lones

Front 55

in the money market when the interest rate is below equilibriu interest rate there is an excess of money, what happens..

Back 55

people will try to sell bonds
interest rates will rise

Front 56

what benefits homeowners when interest rates are falling

Back 56

adjustable rate mortgages

Front 57

what are long term debt securities from less well known corporations with lower credit ratings

Back 57

junk bonds

Front 58

who was the junk bond king

Back 58

drexel burnham

Front 59

what is short term debt securitiy issued by large banks and corporations

Back 59

commercial paper

Front 60

commercial papers totals what money total right now

Back 60

2.6 trillion

Front 61

to avoid the reserve requirements on transaction depots, any balances above a certain amount in a corporations checking account at the end of a busines day are "swept out" of the account and invested in overnight securities that pay the corporation interest..what is this called

Back 61

sweep account

Front 62

state banks that aren't members of the fed have what insurance

Back 62

FDIC

Front 63

lender provides the borrower with an amount of funds, which must be repaid to lender at the maturity date along with an additional payment for the interest

Back 63

simple loan

Front 64

lender provides the borrower with an amount of funds, which must be repaid by making the same payment every period, consisting of part of the principal and interest

Back 64

fixed payment loan

Front 65

pays the owner of the bond a fixed interest payment every year until the maturity date, when a specified final amount is repaid.. example would be a what

Back 65

coupon bond. treasury bond

Front 66

bought at a price below its face value ( at a discount) and the face value is repaid at the maturity date

Back 66

discount bond

Front 67

interest rate that equates the present value of payments received from a debt instrument with its value today

Back 67

ytm

Front 68

a long term security has greater interest-rate risk and therefore would have a higher what

Back 68

interest rate