Principles of Macroeconomics

Running head: PRINCIPLES OF MACROECONOMICS
Macro Economics
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PRINCIPLES OF MACROECONOMICS1
Table of Contents
Problem Set 5...................................................................................................................................2
Question 1........................................................................................................................................2
Question 2........................................................................................................................................2
Question 3........................................................................................................................................2
Question 4........................................................................................................................................3
Question 5........................................................................................................................................3
References........................................................................................................................................5

PRINCIPLES OF MACROECONOMICS2
Problem Set 5
Question 1
Money has three important function which it intends to perform it acts as a medium of
exchange, as a unit of account and it act as a storage of value. In terms of medium of exchange
money acts as a medium for changing various goods and services can be changed on a daily
basis. A unit of account is measured whereby prices are quoted in terms of monetary value.
Money can be defined in terms of store of wealth or storage of value (Ball, 2017)..
The most important function of money is to serve as a medium of exchange which
facilitates exchange and transfer of various goods and services in an economy. The same
facilitates in transfer of money between the economy and helps in easy transfer of goods and
services (Deleplace & Nell, 2016).
Question 2
The discount rate is the applicable interest rate which is charged by Federal Rate on the
loan given to private bank. The same can be termed also as the applicable interest rate in the
economy. On the other hand, the federal fund rate is the interest rate on loans which is generally
taken between two banks (Lothian, 2017).
Question 3
a) The balance sheet would be seeing a change whereby the liability position of the
company would be reduced by a sum of $200, whereby the remaining amount of balance
would be around $3800. On the other hand, side the required reserves would be reduced