1.Name 4 examples of real capital. What is the difference between real and financial capital?

2.What is marginal revenue product of capital? What factors influence MRP?

3.Why do demand curves for capital slope downward?

4.Name two determinants of the supply of capital.

5.Draw a picture of the market for capital in equilibrium. Be sure to fully label axes and curves.

6. Draw a picture showing how financial intermediaries work.

7.Draw a picture showing how non-intermediary financial institutions work.

8.Name three major categories of financial intermediaries and one example of each.

9.What is the difference between a security and a non-security financial claim?

10.Name two examples of securities.

11.Name one example of a non-security financial claim.

12.June deposits $1,000 in Sandy Bank. Yul borrows $30,000 from Sandy Bank. Use T-accounts to show the effects of the two transactions on assets and liabilities for June, Yul, and Sandy Bank.

13.Name four services that financial intermediaries provide when transforming direct claims into indirect claims.

14.Identify whether each of the following assets is a direct or an indirect financial claim.

Asset?Asset?Asset?XYZ, Inc. common stockD / ISavings acct. at ABC BankD / IEmployer pension accountD / ILife insurance policyD / INote for loan to Uncle FredD / IMortgage loan to daughterD / IChecking accountD / IU.S. Treasury billD / ICertificate of depositD / IJaytown municipal bondD / IShares in a stock mutual fundD / IAT&T Commercial paper unitD / I

15.Name six typical functions served by a central bank.

16.Which Fed officials serve on the Federal Open Market Committee?

17.What organization mechanisms are in place to promote political independence of the Federal Reserve?

18. In which Federal Reserve Bank district is Springfield, MO located? Where is our main FRB located? Where are

our regions FRB branches?

19.What is typically the Feds largest asset category? What is its largest liability?

20.Agri Bank has $2,000 in vault cash and $15,000 in deposits at the Federal Reserve Bank. Agri Bank has total

loans = $45,000 and total deposits = $100,000. The Fedrequires reserves = 10% of deposits.

a. What is Agri Banks total reserves amount?

b. What is Agri Banks required reserves amount?

c. What is Agri Banks excess reserves amount?

d. What is the maximum amount of new loans that Agri bank can make?

21.Same data as #20, EXCEPT the Central Bank changes the reserve requirement (k) to 7%.

a. What is Agri Banks total reserves amount?

b. What is Agri Banks required reserves amount?

c. What is Agri Banks excess reserves amount?

d. What is the maximum amount of new loans that Agri bank can make?

e. What happened to the monetary base from #20 to #21?

22.For each of the Feds monetary policy tools, indicate the action the fed would take to achieve the goals.

Monetary Policy GoalsFed Policy ToolIncrease money supply, cut interest ratesReduce money supply, raise interest rates Open market operations Discount rate Reserve requirement (k)

23.What are the components of: a. M1b. M2

24.What is the difference between monetary policy and fiscal policy?

25.What is the difference between the discount rate and the Fed funds rate?

26.When the Federal Reserve conducts expansionary monetary policy, what is the desired/expected effect

(increase/decrease) on each of the following variables?

a. Interest ratesd. Business investmentg. Construction

b. Money supply growthe. Foreign exchange value of USDh. Exports

c. Inflation/inflation pressuref. Unemployment