ECO 4223 EXAM 3 MONEY AND FINANCIAL
MARKETS EXAM 3 (2026-2027) QUESTIONS AND
CORRECT ANSWERS GRADED A+
1. demand to hold bitcoin.
2. less, more
3. a rectangular hyperbola
Modeling Bitcoin as Money:
1. The demand for money (DM) in this model economy is the
____________________________________________.
2. As before, people hold money to make transactions. As the purchasing power of
money (PPM) increases, proportionately ________ money is required to make the
same transactions and if it decreases proportionately ___________ money is
required.
3. The demand for money is _________________________________________.
1. non-monetary use, just the total shock of bitcoin.
2. predetermined, unanticipated changes in money supply.
3. as if it were fixed.
Modeling Bitcoin as Money:
1. Recall that bitcoin has no ______________________________. Hence, the
supply of money (SM) is _______________________________________.
2. Since the supply of bitcoin is ________________________, there are no
________________________________________________.
3. We can treat the supply of money ____________________________.
,1. the opportunity cost of bitcoin mining.
2. constant.
Modeling Bitcoin as Money:
1. The marginal cost of production (c) reflects
__________________________________________________________________
______.
2. To simplify the analysis, we assume the marginal cost of mining bitcoin is
_______________.
1. the (p, B) combination, SM = DM = c.
2. (p1, B)
Modeling Bitcoin as Money:
1. Equilibrium in the model is expressed as __________________________ where
___________________.
2. For example, the economy is in equilibrium at _________________.
1. purchasing power increases from p1 to p2.
2. profitable, predetermined.
3. rises, eliminated.
Shocks to Demand:
1. Suppose demand for bitcoin increases from DM to DM'.
Immediately following the shock,
_________________________________________.
,2. Mining is more ___________________, but supply of bitcoin is
_______________________.
Marginal cost of production ___________ until abnormal profit opportunity is
___________________.
1. purchasing power decreases from p1 to p2.
2. costs more than it is worth.
3. falls, unprofitable.
Shocks to Demand:
1. Suppose demand for bitcoin decreases from DM to DM'.
Immediately following the shock, _____________________________________.
2. Mining bitcoin now _____________________________________.
3. Marginal cost of production __________ until mining is no longer
_________________________.
monetary regime
The __________________ regime refers to the institutions and mechanisms that
govern the supply of money and, hence, its purchasing power.
Bitcoin
_________________ is an unbacked digital currency that was launched in 2009 by
the pseudonymous Satoshi Nakamoto.
, 100,000,000 satoshis (or sats)
1 bitcoin can be divided into ___________________________________________.
blockchain technology
When bitcoin was introduced, it offered a novel way to process transactions via its
____________________________________.
not all dots connected
Explain decentralized.
all dots connected to a center point
Explain centralized.
all dots connected to each other
Explain distributed.
Proof of Work
-Producing an appropriate hash is difficult.
-Miners have random chance of producing appropriate hash, which is determined
by the relative computing power they devote to system.
MARKETS EXAM 3 (2026-2027) QUESTIONS AND
CORRECT ANSWERS GRADED A+
1. demand to hold bitcoin.
2. less, more
3. a rectangular hyperbola
Modeling Bitcoin as Money:
1. The demand for money (DM) in this model economy is the
____________________________________________.
2. As before, people hold money to make transactions. As the purchasing power of
money (PPM) increases, proportionately ________ money is required to make the
same transactions and if it decreases proportionately ___________ money is
required.
3. The demand for money is _________________________________________.
1. non-monetary use, just the total shock of bitcoin.
2. predetermined, unanticipated changes in money supply.
3. as if it were fixed.
Modeling Bitcoin as Money:
1. Recall that bitcoin has no ______________________________. Hence, the
supply of money (SM) is _______________________________________.
2. Since the supply of bitcoin is ________________________, there are no
________________________________________________.
3. We can treat the supply of money ____________________________.
,1. the opportunity cost of bitcoin mining.
2. constant.
Modeling Bitcoin as Money:
1. The marginal cost of production (c) reflects
__________________________________________________________________
______.
2. To simplify the analysis, we assume the marginal cost of mining bitcoin is
_______________.
1. the (p, B) combination, SM = DM = c.
2. (p1, B)
Modeling Bitcoin as Money:
1. Equilibrium in the model is expressed as __________________________ where
___________________.
2. For example, the economy is in equilibrium at _________________.
1. purchasing power increases from p1 to p2.
2. profitable, predetermined.
3. rises, eliminated.
Shocks to Demand:
1. Suppose demand for bitcoin increases from DM to DM'.
Immediately following the shock,
_________________________________________.
,2. Mining is more ___________________, but supply of bitcoin is
_______________________.
Marginal cost of production ___________ until abnormal profit opportunity is
___________________.
1. purchasing power decreases from p1 to p2.
2. costs more than it is worth.
3. falls, unprofitable.
Shocks to Demand:
1. Suppose demand for bitcoin decreases from DM to DM'.
Immediately following the shock, _____________________________________.
2. Mining bitcoin now _____________________________________.
3. Marginal cost of production __________ until mining is no longer
_________________________.
monetary regime
The __________________ regime refers to the institutions and mechanisms that
govern the supply of money and, hence, its purchasing power.
Bitcoin
_________________ is an unbacked digital currency that was launched in 2009 by
the pseudonymous Satoshi Nakamoto.
, 100,000,000 satoshis (or sats)
1 bitcoin can be divided into ___________________________________________.
blockchain technology
When bitcoin was introduced, it offered a novel way to process transactions via its
____________________________________.
not all dots connected
Explain decentralized.
all dots connected to a center point
Explain centralized.
all dots connected to each other
Explain distributed.
Proof of Work
-Producing an appropriate hash is difficult.
-Miners have random chance of producing appropriate hash, which is determined
by the relative computing power they devote to system.
