ECON3005 Topic 1

This is the total collection of pieces of property that serve to store value (money and assets).

• Money

• Wealth

• Currency

• Income

Jane is at the supermarket. She is comparing the prices of three different brands of ketchup. What function of money is being depicted?

• Store of value

• Medium of exchange

• Unit of account

• Store of credit

Which of the following statements is FALSE?

• Money must be potable.

• Money must be durable.

• Money must be divisible.

• Money must be accessible.

What is the main limitation of commodity money?

• It is heavy and hard to transport.

• It can be easily stolen and expensive to transport in bulk.

• It takes a long time to be processed.

• It requires internet connection.

M1 includes all of the following EXCEPT

• Currency

• Checking accounts

• Travelers check

• Savings deposits

For a simple loan, what is the present value of $10,000 to be paid in five years if the interest rate is 10%?

• $3,790.79

• $6,209.21

• $13,790.79

• $16,209.21

This is a credit market instrument where the borrower pays a fixed interest payment every year until maturity date when a specified final amount is paid.

• Simple loan

• Discount bond

• Fixed payment loan

• Coupon bond

Which two credit market instruments make payments only at their maturity dates?

• Simple loan and discount bond

• Simple loan and coupon bond

• Discount bond and coupon bond

• Discount bond and fixed payment loan

A discount bond has a face value of $600 and a current price of $550. What is the yield to maturity on this discount bond?

• 9%

• 9.09%

• 8%

• 8.33%

Which of the following definitions is TRUE about the Fisher equation?

• The Fisher equation states that the real interest rate is equal to the nominal interest rate plus the expected rate of inflation.

• The Fisher equation states that the real interest rate is equal to the nominal interest rate minus the expected rate of unemployment.

• The Fisher equation states that the nominal interest rate is equal to the real interest rate plus the expected rate of inflation.

• The Fisher equation states that the nominal interest rate is equal to the real interest rate minus the expected rate of inflation.