Question 161pts

Goodhart named the two competing theories concerning the historical origins of money asTheory MandTheory C. Which of the following statements about these theories is correct?

Group of answer choices

Theory C explains money as having its origins in a barter system of exchange, while Theory M explains money as having its origins in the first taxes and tributes paid to governments.

Theory M explains money as having its origins in a barter system of exchange, while Theory C explains money as having its origins in the first taxes and tributes paid to governments.

Theory M and Theory C both explain money as having its origins in a barter system of exchange.

Theory M and Theory C both explain money as having its origins in debt and in the first taxes and tributes paid to governments.

Theory M is a theory of fiat money, while Theory C is a theory of commodity money.

Question 171pts

Senior staff at the International Monetary Fund have explained in recent years that the loanable funds theory of interest rates and crowding out, while a logical theory, is not a realistic description of how interest rates are set in modern financial systems, or of the consequences of government deficit spending. Which of the following factors best explains why loanable funds theory is misleading?

Group of answer choices

Investment spending facilitates saving rather than savings being required before investment spending can take place. The official interest rate is not determined by the demand for loanable funds. Instead, the central bank sets the official interest rate.

Money that is saved will not necessarily be made available for investment.

Central banks can always create reserves without limit, which they pay for government deficits.

Banks can lend without limit, and create deposits by so doing. The government can always borrow from banks. It is only when the government spends the deposits created that banks need to worry about the reserves. The amount of reserves banks hold depends solely on the amount of savings. To attract more savings, banks increase the interest rate.

If the government does not borrow and spend, private firms can borrow more savings to invest. When private firms borrowing excessively, it places upward pressure on the official interest rate

Question 181pts

The interest rate on 10-year Japanese government bonds has been approximately 0% in 2020. Which of the following is the most likely explanation of this near-zero market rate of interest on government bonds?

Group of answer choices

Japanese government budget deficits.

Japanese government budget surpluses in recent years.

Purchases of bonds by the Bank of Japan on the primary market.

Purchases of bonds by the Bank of Japan on the secondary market.

The low level of Japanese government debt

Question 191pts

Suppose you receive the following spot exchange rate quotes from a bank:

AUS/USD 0.71-0.72

You have USD 1,000,000, which you wish to convert into AUD. How many AUD will you be able to purchase?

Group of answer choices

720,000

715,000

710,000

1,388,889

1,408,451

Question 201pts

You purchase a face value of $1,000,000 portfolio of bills, with 90 days to run, at a yield of 2%pa. What will happen to the market value of this portfolio, if the central bank unexpectedly tightens monetary policy tomorrow?

Group of answer choices

Market value will fall, because interest rates will have risen.

Market value will fall, because interest rates will have fallen.

Market value will rise, because interest rates will have risen.

Market value will remain at $1,000,000.

Market value will rise, because interest rates will have fallen.