Chapter 14

¡Supera tus tareas y exámenes ahora con Quizwiz!

Imagine that Kristy deposits​ $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is​ 20%. Refer to the scenario above. As a result of​ Kristy's deposit, Bank A can make a maximum loan of

$8,000.

The sale of Treasury securities by the Federal Reserve​ will, in​ general,

decrease the quantity of reserves held by banks

If a person takes​ $100 from​ his/her piggy bank at home and puts it in​ his/her savings​ account, then M1 will​ ________ and M2 will​ ________.

decrease; not change

The required reserves of a bank equal its​ ________ the required reserve ratio.

deposits multiplied by

Which of the following about fiat money is​ false? Fiat money

is backed by gold.

Banks can make additional loans when required reserves are

less than total reserves.

The seven members of the Board of Governors of the Federal Reserve are appointed by

the President.

In response to the destructive bank panics of the Great​ Depression, future bank panics are designed to be prevented by

the establishment of the Federal Deposit Insurance Corporation.

The major shortcoming of a barter economy is

the requirement of a double coincidence of wants.

Bank reserves include

vault cash and deposits with the Federal Reserve.

Suppose that you deposit​ $2,000 in your bank and the required reserve ratio is 10 percent. The maximum loan your bank can made as a direct result of your deposit is

​$1,800.

Imagine that Kristy deposits​ $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is​ 20%. Refer to the scenario above. As a result of​ Kristy's deposit, Bank​ A's required reserves increase by

​$2,000

Suppose a bank has​ $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent. If the Federal Reserve reduces the required reserve ratio to 15​ percent, then the bank will now have excess reserves of

​$5 million.

Imagine that Kristy deposits​ $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is​ 20%. Refer to the scenario above. As a result of​ Kristy's deposit, checking account deposits in the banking system as a whole​ (including the original​ deposit) could eventually increase up to a maximum of

​$50,000.

Imagine that Kristy deposits​ $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is​ 20%. Refer to the scenario above. As a result of​ Kristy's deposit, Bank​ A's excess reserves increase by

​$8,000.

A decrease in the discount rate​ ________ bank reserves and​ ________ the money supply if banks respond appropriately to the change in the rate.

​increases; increases

Imagine that Kristy deposits​ $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is​ 20%. Refer to the scenario above. As a result of​ Kristy's deposit, Bank​ A's reserves immediately increase by

10,000.

If the reserve requirement ratio ​(RR​) is​ 0.20, the simple deposit multiplier is

5.

Which of the following best describes how banks create​ money?

Banks create checking account deposits when making loans from excess reserves.

The Federal​ Reserve's narrowest definition of the money supply is

M1.

Open market operations refer to the purchase or sale of​ ________ to control the money supply.

U.S. Treasury securities by the Federal Reserve

Banks can continue to make loans until their

actual reserves equal their required reserves

In​ economics, money is defined as

any asset people generally accept in exchange for goods and services.

Economies where goods and services are traded directly for other goods and services are called​ ________ economies.

barter

To decrease the money supply, the Fed Reserve could conduct an open market sale of Treasury securites

conduct an open market sale of Treasury securities.

Silver is an example of a

commodity money.

To increase the money​ supply, the Federal Reserve could

conduct an open market purchase of Treasury securities.

The M1 measure of the money supply equals

currency plus checking account balances plus​ traveler's checks.

The purchase of Treasury securities by the Federal Reserve​ will, in​ general,

increase the quantity of reserves held by banks.

A decrease in the reserve requirement​ ________ bank reserves and​ ________ the money supply.

increases; increases

Which of the following is not a function of the Federal Reserve System or the​ "Fed"?

insuring deposits in the banking system

Fiat money has

little to no intrinsic value and is authorized by the central bank or governmental body.

Which of the following assets is most​ liquid?

money

You earn​ $500 a​ month, currently have​ $200 in​ currency, $100 in your checking​ account, $2,000 in your savings​ accounts, $3,000 worth of illiquid assets and​ $1,000 of debt. Using the M1 measure of​ money, you have

money​ = $300, annual income​ = $6,000, and wealth​ = $4,300.

If a person withdraws​ $500 from​ his/her checking account and holds it as​ currency, then M1 will​ ________ and M2 will​ ________.

not​ change; not change

Of the three primary tools the Federal Reserve uses to conduct monetary​ policy, the tool used most often is

open market operations.

The three main monetary policy tools used by the Federal Reserve to manage the money supply are

open market​ operations, discount​ policy, and reserve requirements.

If whole tomatoes were​ money, which of the following functions of money would be the hardest for tomatoes to​ satisfy?

store of value

Which of the following functions of money would be violated if inflation were​ high?

store of value


Conjuntos de estudio relacionados

Sociology 211 Pre 2nd Quiz - Sample Questions

View Set

9.3 Teddy Roosevelt's Square Deal

View Set

Combo with "AP Chem Cations and Anions" and 13 others

View Set

Management Science 590 - Chapter 06

View Set

AS Geography - Atmosphere and Weather

View Set

Managerial Economics (Froeb) - Ch 8 MC Solutions Understanding Markets and Industry Changes

View Set