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ECO_201011S_20-_20Workshop_202 - UNIVERSITY OF CAPE TOWN...

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UNIVERSITY OF CAPE TOWN SCHOOL OF ECONOMICS ECO1011S MACROECONOMICS I WORKSHOP 2 – 14 th OCTOBER 2009 LECTURERS: BRENDAN MEEHAN THABANG OLIPHANT 1. When’economists’say’that’money’serves’as’a’medium’of’exchange,’they’mean’ that’it’is ’ A. a’way’to’keep’wealth’in’a’readily’spendable’form’for’future’use B. a’means’of’payment C. a’monetary’unit’for’measuring’and’comparing’the’relative’values’of’ goods’ D. declared’as’lega l’tender’by’the’government 2. If’nominal’GDP’is’R600’billion’and,’on’average,’each’rand’is’spent’(changes’ hands)’three’times’per’year’(i.e.’the’income’velocity’of’circulation’is’three),’then’ the’amount’of’money’demanded’for’transactions’purposes’will’be A. R1800’billion ’ B. R600’billion ’ C. R200’billion ’ D. R1200’billion ’ Use’the’following’diagram’to’answer’the’question’below
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3. If’the’money’supply’were’vertical’(like’S m),’this’would’suggest’that A. bond’prices’and’interest’rates’are’inversely’related B. the’stock’of’money’is’de termined’by’the’central’bank’and’does’not’ change’when’the’interest’rate’changes C. the’velocity’of’money’is’zero D. lower’interest’rates’result’in’lower’opportunity’costs’of’supplying’money You’are’given’the’following’information’to’answer’the’following’questi on’ The’money’supply’in’the’market’is’400’+’(50) i’ The’demand’for’active’balances’is’250 The’reserve’ratio’is’10%
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