ECO4223 EXAM 1 STUDY GUIDE
2026/2027 COMPLETE QUESTIONS
WITH VERIFIED CORRECT ANSWERS ||
100% GUARANTEED PASS
<NEWEST VERSION>
1. money - ANSWER ✔ a common medium for indirect exchanges
2. common functions of money - ANSWER ✔ medium of exchange, store of
value, unit of account
3. medium of exchange - ANSWER ✔ Any item sellers generally accept and
buyers generally use to pay for a good or service; money; a convenient
means of exchanging goods and services without engaging in barter.
4. store of value - ANSWER ✔ a means of holding purchasing power over
time. expected to have a positive price in the future.
5. unit of account - ANSWER ✔ the unit in which accounting is done (prices
are quoted or recorded in terms of this)
,6. inside money - ANSWER ✔ created by a private vector that is a claim to
another asset (i.e., checking accounts: the bank owes you x amount of
dollars)
7. outside money - ANSWER ✔ used in final settlement. (i.e., a $20 bill, no
one owes you anything. it is your asset without being anyone's liability)
8. two types of outside money - ANSWER ✔ commodity money: a good with
other uses that is used as money (gold, silver, salt)
fiat money: has no use other than being money (cash)
9. views on why we use money - ANSWER ✔ 1. historical materialist view
2. economist view
10.Dynamic quantity theory of money - ANSWER ✔ 1. velocity growth is
constant
2. real output growth is constant
11.three views on optimal rate of inflation - ANSWER ✔ 1. Zero inflation bc it
minimizes unnecessary price adjustments.
2. Slightly-negative inflation bc it is consistent with the optimum quantity of
money.
3. Slightly-positive inflation because it lubricates labor markets.
12.monetary regime - ANSWER ✔ the institutions/mechanisms that govern the
supply of money, thus its purchasing power
,13.Simple Model for the Gold Standard: Demand for Money (Dm) - ANSWER
✔ as PPM increases/decreases, less/more money is required to make same
transactions
14.Simple Model for the Gold Standard: Supply of Money (Sm) - ANSWER ✔
the difference between all above ground gold (G) and the stock of non-
monetary (Sn)
Sm = G - Sn
in equilibrium, supply of non-monetary gold Sn = demand Dn.
hence, Sm = G - Dn
15.Simple Model for the Gold Standard: Long-run marginal cost of producing
gold coins (c) - ANSWER ✔ reflects opportunity costs and marginal
benefits of fixing gold in unrecoverable ways. Assume it is constant.
16.comparative statics - ANSWER ✔ identify causal mechanisms and make
predictions
17.Financial markets - ANSWER ✔ markets in which funds go from those who
have excess, to those who have shortage
18.Security - ANSWER ✔ a claim on the issuer's future income or assets
19.Bonds - ANSWER ✔ Debt securities that promise to make payments for a
period of time
20.________ markets are especially important to economic activity. They allow
corporations to finance projects, and interests rates are determined here. -
ANSWER ✔ Bond markets
, 21.High Interest Rate = - ANSWER ✔ Deterred from financing, interested in
saving
22.Interest rates affect _________ willingness to spend, and _______'s
investments - ANSWER ✔ consumer's; business
23.T or F: Rates have fluctuated a lot in the past 40 years - ANSWER ✔ True
24.financial intermediaries - ANSWER ✔ financial institutions through which
savers can indirectly provide funds to borrowers
25.Banks - ANSWER ✔ Financial institutions that accept deposits and make
loans
26.The term banks includes firms such as: - ANSWER ✔ commercial banks,
savings and loan associations, mutual savings banks, and credit unions.
27.T or F: Banks are the financial intermediaries that the average person
interacts with most frequently. - ANSWER ✔ True
28.current yield - ANSWER ✔ used as an approximation to describe interest
rates on long term bonds
29.prices and returns for long term bonds are - ANSWER ✔ volatile than those
for shorter term bonds
2026/2027 COMPLETE QUESTIONS
WITH VERIFIED CORRECT ANSWERS ||
100% GUARANTEED PASS
<NEWEST VERSION>
1. money - ANSWER ✔ a common medium for indirect exchanges
2. common functions of money - ANSWER ✔ medium of exchange, store of
value, unit of account
3. medium of exchange - ANSWER ✔ Any item sellers generally accept and
buyers generally use to pay for a good or service; money; a convenient
means of exchanging goods and services without engaging in barter.
4. store of value - ANSWER ✔ a means of holding purchasing power over
time. expected to have a positive price in the future.
5. unit of account - ANSWER ✔ the unit in which accounting is done (prices
are quoted or recorded in terms of this)
,6. inside money - ANSWER ✔ created by a private vector that is a claim to
another asset (i.e., checking accounts: the bank owes you x amount of
dollars)
7. outside money - ANSWER ✔ used in final settlement. (i.e., a $20 bill, no
one owes you anything. it is your asset without being anyone's liability)
8. two types of outside money - ANSWER ✔ commodity money: a good with
other uses that is used as money (gold, silver, salt)
fiat money: has no use other than being money (cash)
9. views on why we use money - ANSWER ✔ 1. historical materialist view
2. economist view
10.Dynamic quantity theory of money - ANSWER ✔ 1. velocity growth is
constant
2. real output growth is constant
11.three views on optimal rate of inflation - ANSWER ✔ 1. Zero inflation bc it
minimizes unnecessary price adjustments.
2. Slightly-negative inflation bc it is consistent with the optimum quantity of
money.
3. Slightly-positive inflation because it lubricates labor markets.
12.monetary regime - ANSWER ✔ the institutions/mechanisms that govern the
supply of money, thus its purchasing power
,13.Simple Model for the Gold Standard: Demand for Money (Dm) - ANSWER
✔ as PPM increases/decreases, less/more money is required to make same
transactions
14.Simple Model for the Gold Standard: Supply of Money (Sm) - ANSWER ✔
the difference between all above ground gold (G) and the stock of non-
monetary (Sn)
Sm = G - Sn
in equilibrium, supply of non-monetary gold Sn = demand Dn.
hence, Sm = G - Dn
15.Simple Model for the Gold Standard: Long-run marginal cost of producing
gold coins (c) - ANSWER ✔ reflects opportunity costs and marginal
benefits of fixing gold in unrecoverable ways. Assume it is constant.
16.comparative statics - ANSWER ✔ identify causal mechanisms and make
predictions
17.Financial markets - ANSWER ✔ markets in which funds go from those who
have excess, to those who have shortage
18.Security - ANSWER ✔ a claim on the issuer's future income or assets
19.Bonds - ANSWER ✔ Debt securities that promise to make payments for a
period of time
20.________ markets are especially important to economic activity. They allow
corporations to finance projects, and interests rates are determined here. -
ANSWER ✔ Bond markets
, 21.High Interest Rate = - ANSWER ✔ Deterred from financing, interested in
saving
22.Interest rates affect _________ willingness to spend, and _______'s
investments - ANSWER ✔ consumer's; business
23.T or F: Rates have fluctuated a lot in the past 40 years - ANSWER ✔ True
24.financial intermediaries - ANSWER ✔ financial institutions through which
savers can indirectly provide funds to borrowers
25.Banks - ANSWER ✔ Financial institutions that accept deposits and make
loans
26.The term banks includes firms such as: - ANSWER ✔ commercial banks,
savings and loan associations, mutual savings banks, and credit unions.
27.T or F: Banks are the financial intermediaries that the average person
interacts with most frequently. - ANSWER ✔ True
28.current yield - ANSWER ✔ used as an approximation to describe interest
rates on long term bonds
29.prices and returns for long term bonds are - ANSWER ✔ volatile than those
for shorter term bonds
