Explain why economies without banks suffer from high search costs.
> Evaluate the difference quotient for the given function. Simplify your answer. x + 3 x + 1' f(x) – f(1) x - 1 f(x)
> The manager of a weekend flea market knows from past experience that if he charges dollars for a rental space at the market, then the number of spaces he can rent is given by the equation y = 200 - 4x. (a). Sketch a graph of this linear function. (Rememb
> The table shows the mean (average) distances d of the planets from the sun (taking the unit of measurement to be the distance from the earth to the sun) and their periods T (time of revolution in years). (a). Fit a power model to the data. (b). Kepler&
> Graph the function by hand, not by plotting points, but by starting with the graph of one of the standard functions given in Section 1.2, and then applying the appropriate transformations. y = |cos
> Graph the function by hand, not by plotting points, but by starting with the graph of one of the standard functions given in Section 1.2, and then applying the appropriate transformations. y = 1 + - 1
> Graph the function by hand, not by plotting points, but by starting with the graph of one of the standard functions given in Section 1.2, and then applying the appropriate transformations. y =}(x? + 8x)
> Graph the function by hand, not by plotting points, but by starting with the graph of one of the standard functions given in Section 1.2, and then applying the appropriate transformations. y = |x| - 2
> Graph the function by hand, not by plotting points, but by starting with the graph of one of the standard functions given in Section 1.2, and then applying the appropriate transformations. y = √x + 3
> Graph the function by hand, not by plotting points, but by starting with the graph of one of the standard functions given in Section 1.2, and then applying the appropriate transformations. y = 1/ x - 4
> Graph the function by hand, not by plotting points, but by starting with the graph of one of the standard functions given in Section 1.2, and then applying the appropriate transformations. y = 4 sin 3x
> Graph the function by hand, not by plotting points, but by starting with the graph of one of the standard functions given in Section 1.2, and then applying the appropriate transformations. y = x2 - 4x + 3
> Graph the function by hand, not by plotting points, but by starting with the graph of one of the standard functions given in Section 1.2, and then applying the appropriate transformations. y = 1 - x2
> Determine an appropriate viewing rectangle for the given function and use it to draw the graph. f(x) = sin Ja %3D
> Determine whether the curve is the graph of a function of x. If it is, state the domain and range of the function. 이
> What do all members of the family of linear functions f (x) = c - x have in common? Sketch several members of the family
> Graphs of f and g are shown. Decide whether each function is even, odd, or neither. Explain your reasoning. yA
> An electricity company charges its customers a base rate of $10 a month, plus 6 cents per kilowatt-hour (kWh) for the first 1200 kWh and 7 cents per kWh for all usage over 1200 kWh. Express the monthly cost E as a function of the amount of electricity us
> What do all members of the family of linear functions f (x) = 1 + m (x+3) have in common? Sketch several members of the family.
> A Norman window has the shape of a rectangle surmounted by a semicircle. If the perimeter of the window is 30 ft, express the area A of the window as a function of the width of the window. -r-
> Find a formula for the described function and state its domain. Express the surface area of a cube as a function of its volume.
> Find an expression for the function whose graph is the given curve. The top half of the circle x2 + (y – 2)2 = 4
> Find an expression for the function whose graph is the given curve. The line segment joining the points (-5, 10) and (7, -10).
> Find an expression for the function whose graph is the given curve. The line segment joining the points (1, -3) and (5, 7).
> The graph shows the height of the water in a bathtub as a function of time. Give a verbal description of what you think happened. height (inches) 15+ 10t time (min) 10 15 in
> Suppose the graph of f is given. Write equations for the graphs that are obtained from the graph of f as follows. (a). Shift 3 units upward. (b). Shift 3 units downward. (c). Shift 3 units to the right. (d). Shift 3 units to the left. (e). Reflect about
> What is the Pigou effect and how does it result in a downward-sloping aggregate demand curve?
> Explain the difference between movement down, or along, the aggregate demand curve and a shifting out of the aggregate demand curve.
> Bobby is confused. He states: “Since prisoners are not allowed to smoke in prisons any longer, Radford’s examples of cigarettes in POW camps no longer applies.” How would you explain to Bobby how Radford’s story demonstrates the concepts of the criteria
> You read a news story about a country that is suffering from rapid, ongoing increases in the cost of living. Which characteristic of money is being directly negatively impacted in that economy?
> 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.
> Under which theory might a steep yield curve suggest market participants are worried that inflation will increase in the future?
> Offer an explanation of how Operation Twist may have resulted in a flat yield curve.
> Offer two different explanations for why an inverted yield curve might signal an economic slowdown is on the way.
> Proponents of segmented market theory disagree with which of the following?
> How would proponents of the term premium theory explain why a yield curve becomes more steep from one time period to the next?
> How is the makeup of assets and liabilities of life insurance companies different from those of depository institutions? Why?
> According to the pure expectations theory, what is happening when the yield becomes more steep from one-time period to the next? What does that tell you?
> If Kari is the 35% income tax bracket and is thinking about buying a corporate bond that yields 2.5%, what yield must a muni bond pay to make her indifferent between the two bonds, ceteris paribus?
> If Tommy is in the 15% income tax bracket and is considering buying a muni bond that yields 3%, what yield would a corporate bond have to pay to make him indifferent between the two bonds, ceteris paribus?
> Do you think the preferential tax treatment of muni bonds should be eliminated? Or, should the tax benefit of muni bonds be reduced? Why or why not?
> Which of the following is not an assumption of the simple deposit multiplier?
> You read a story in the press that there are growing fears of a credit crunch. What impact might this have in terms of the simple deposit multiplier?
> Explain how architecture may have been used to avoid bank runs.
> According to the simple deposit multiplier, what happens if there is a deposit and the required reserve ratio is zero?
> If $100 million is withdrawn from the banking system, what would happen to the money supply, according to the simple deposit multiplier, if the required reserve ratio is 4%? What if the required reserve ratio is 6%? What do you think will happen to inter
> If $100 million is deposited into the banking system, what would happen to the money supply, according to the simple deposit multiplier, if the required reserve ratio is 4%? What if the required reserve ratio is 6%?
> Sarah and David are interested in purchasing life insurance policies.
> Which of the following has the highest level of liquidity?
> Explain how banks offer diversification to savers even if a depositor puts all of their funds into a single bank account.
> High deductibles are used in which financial market to help address the moral hazard problem?
> Explain how compensating balances help to resolve the moral hazard problem in bank lending.
> what is the relationship between the principle–agent problem in corporate governance and the moral hazard problem?
> Which government regulatory agency was created, in great part, to help overcome the adverse selection problem in equity markets?
> It is often stated that “we live in an information age,” yet the adverse selection problem still exists. Why?
> How does the existence of “free riders” help to perpetuate the adverse selection problem?
> Akerlof changed the conditions of perfect competition by adding in what factor that often occurs in real life?
> Many automobile insurance policies require a deductible to be paid by the insured. A deductible is a tool to help control for which problem?
> CarMax offers a solution to the lemons problem in the used car market. What other ways might the lemons problem be resolved?
> The assumption that the stock market reflects all information, both public and private, is referred to as:
> Some people argue that the rise of behavioral finance raises questions about the level of efficiency in the stock market. Explain this argument.
> In an “import substitutions” policy, what is being substituted for imports?
> The IMF and World Bank often are described as “sister organizations.” One could say they are “sisters” in that they are very similar yet also very different. Explain this argument.
> Few argue with the idea that the policies the IMF suggests are sound long-term policies. Yet critics believe these sound long-term policies are the wrong policies for the IMF to be suggesting. Explain the critics’ argument.
> Why did the IMF suffer from “mission creep”?
> How did the “closing of the gold window” in 1971 affect how the IMF operates?
> How and why did the International Monetary Fund attempt to end “beggar-thy-neighbor” policies?
> How does the World Bank get its funds?
> Today much of the regulation of depository institutions occurs at the federal level. How is the insurance industry different?
> Why was Robert McNamara’s tenure at the World Bank so controversial?
> Greg is a bit confused about the creation of the World Bank. Explain to Greg how and why the World Bank was created.
> Which of the following is not a condition for countries to be considered an optimal currency area?
> Would you consider the United States to be an optimal currency area? Why or why not? Yes, due to the following:
> How can a fixed exchange rate regime be used to build the credibility of a central bank?
> Which of the following explain why exchange rates may “overshoot”?
> The currency board exchange rate regime worked well for Hong Kong. Why did currency boards not work so well for other countries?
> The target zone exchange rate regime held promise because it was designed to be flexible yet stable. Why did the target zone regime not work as well as planned?
> In an unsterilized exchange rate intervention, if a central bank wants to push down the value of its currency in the foreign exchange market, it ___________ its own currency, causing the monetary base in its country to ___________.
> Why does the crawling peg exchange rate regime often not work as planned?
> Andrew is a bit confused about risk. In his investments class he learned about risk when purchasing a financial asset, and he thinks that is the same as risk when buying automobile insurance. How would you explain to Andrew the differences between differ
> Why might a central bank want to “sterilize” its exchange rate intervention?
> Joel is confused about what “efficient stock market” means. How would you explain this concept to Joel?
> The S&P 500 Index is different from the Dow Jones Industrial Average in that:
> Why do stock market analysts need to be able to “predict” macroeconomic changes?
> Harry is an old-time investor. He tells you, “When I was young I was told the Dow Jones Industrial Average tells you everything you need to know about how the stock market is doing. Is that still true?” How would you answer Harry’s question?
> According to the Gordon growth model, a stock with an expected dividend payment of $10 next year and an expected growth rate of dividends of 4% should sell at what price if the investor’s discount rate or required rate of return is 6%?
> Steven is very excited. He just found out that the stock he is about to buy has the lowest PE ratio of the stocks of similar firms. Why is he happy? How would you explain to him why he might not want to be so happy?
> Explain in words how the time value of money is related to the price of stocks.
> IPOs take place in which of the following equity markets?
> Crusty is an old-time investor who has not kept up with the changing structure of financial markets. How would you explain to Crusty how the differences between over the counter and stock exchanges have changed over the past 40 years?
> The FOMC meets to decide which of the following?
> Austin has some money saved and is thinking about buying some corporate stock. He can’t decide whether he should buy common stock or preferred stock. What things should affect his decision?
> 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 in dating?
> If the ex- ante real interest rate is less than the ex post real interest rate, which of the following happened?
> Explain why rapid changes in the rate of inflation, as well as inflationary expectations, make business investment decisions difficult.
> Explain why businesspeople should use the real interest rate instead of the nominal interest rate when making economic decisions.
> you read in the financial press that the recent flight to quality is reversing. What will happen in the bond market?
> Offer an explanation to someone with no training in economics for why the yield on US government bonds is used as a substitute for the risk-free rate.
> 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 this is the case.
> The Federal Reserve Bank of New York has a great deal of influence over financial markets to this very day. Yet the New York Fed is not as powerful as many wanted it to be in the early part of the twentieth century. Explain why the New York Fed is today
> When the Fed was created, one of its main purposes was to maintain the gold standard. What does this mean?
