Exam 10: Credit Markets

The opportunity cost of current consumption is ________.

Deposits made by the public into a savings account are referred to as ________.

The following figure shows credit demand and credit supply curves. -Refer to the figure above.It illustrates that ________.

If a bank borrows funds for 3 years,the borrowing will be classified as ________.

If the nominal interest rate increases without any change in the rate of inflation in an economy,________.

The following table shows the balance sheet for Poor Baby Bank. -Refer to the table above.What happens to stockholders' equity if there is an economic downturn and as a result,Poor Baby Bank loses 5 percent of its long-term investments and has to borrow another $10 from other banks?

The following table shows Free Donut Bank's balance sheet. Free Donut Bank has a required reserve ratio of 20 percent and has $75 in excess reserves. -Refer to the table above.What are Free Donut Bank's total liabilities?

Money or goods that parents leave to their children in their wills are referred to as ________.

What does the slope of the credit demand curve imply? When do movements along a credit demand curve occur?

The following figure plots real interest rate against quantity of credit. -Refer to the figure above.All else being equal,an increase in the interest rate will lead to ________.

Which of the following statements is true?

If an individual borrows $100 and pays back $100 after a year to settle his loan,it implies that the rate of interest is ________.

The following figure shows credit demand and credit supply curves. -Refer to the figure above.Assume that the loanable funds market initially is in equilibrium at point A.The media report that a new housing bubble may warrant precaution.Holding all else constant,how might the equilibrium change?

The following table shows the assets and liabilities for Safeco Bank. -Refer to the table above.What is Safeco Bank's required reserve ratio if the bank has $15,000 in excess reserves?

The following table shows the balance sheet for Poor Baby Bank. -Refer to the table above.What is the value of total liabilities for Poor Baby Bank?

Everything else remaining unchanged,what is likely to happen to the equilibrium real interest rate and the equilibrium quantity of credit if the credit supply curve shifts to the left?

Scenario: John is looking to buy a house in Bozeman. He has about $120,000 in savings, and the house he is interested in costs $300,000. When he approaches Boze Bank, the same bank at which all of his five brothers have accounts, he learns that he can borrow at a nominal interest rate of 5 percent. Inflation is 2 percent for 2 years after he buys the house and then increases to 3 percent. Assume that Boze Bank is the only bank in Bozeman and John's five brothers contribute a significant amount to the bank's total savings. -Refer to the scenario above.John's brothers decide to invest all their money in a new business venture outside Bozeman.As a result,John will likely ________.

The following figure shows credit demand and credit supply curves. -Refer to the figure above.Assume that the loanable funds market initially is in equilibrium at point B.If substantial tax credits are promised to firms that invest in domestic facilities,how will the equilibrium change?

Differentiate between a solvent bank and an insolvent bank.Which of the two is likely to have greater stockholders' equity?

Consider two banks: Bank A and Bank B.Bank A has total assets worth $50,000 and total liabilities worth $24,000.In contrast,Bank B has total assets worth $100,000 and total liabilities worth $90,000.Given this information,which of the two banks is more prone to bank runs and why?