CHAPTER 2 AND 3
p. 9 Q2 5s, Q3 4s
Q2) How many prices must a barter economy have
if the economy has four goods? What if it has 400 goods?
Explain why having a money in the second case is beneficial.
4 goods = 6 prices; 400 goods = 79,800 prices.
Review Questions Chapter 4
Section 4-1 Review Questions and Answers
Q1) Firms borrowing in developing countries such as
Brazil often have to pay a higher default risk
premium, ceteris paribus, than similar firms
borrowing in the United States. Explain why
Review Questions Chapter 5
Section 5-1 Review Questions and Answers
Q1) What role did Taylorism, or scientific
management, play in the expansion of financial
markets in the United States?
As a result of the success of Taylorism, the
size of the US economy
Review Questions Chapter 6 Section 6-1 Review Questions
Q1) Explain the difference between movement
down, or along, the aggregate demand
curve and a shifting out of the aggregate
A movement along the curve is caused by
Review Questions Chapter 9 Section 9-1 Review Questions and
Q1) Explain the steps the Federal Reserve goes through
when conducting an expansionary open market operation.
Who is affected and how?
The most important of these is what happens to Bank
Review Questions Chapter 7 Section 7-1 Review Questions and
Q1) While Akerlof described adverse selection in the
used car market, can you think of how adverse
selection might arise in the labor market? Or even
Labor Market Having bette
Review Questions Chapter 8 Section 8-1 Review Questions and
Q1) When the Fed was created, one of its main purposes was
to maintain the gold standard. What does this mean?
Having the currency backed by the government.
Q2) The Federal Reserve Bank
ANSWERS TO APPLIED PROBLEMS
16. Consider a failing bank. How much is a deposit of $290,000 worth if the FDIC uses the payoff method?
The purchase and assumption method? Which method is more costly to taxpayers?
If the FDIC uses the payoff metho