DSM ch 14 ECON2013

Velocity is defined as:

(P × Y)/M.

The money multiplier for the United States is __________.

between 2 and 3

To increase the money supply, the FOMC directs the trading desk located at the Federal Reserve Bank of New York to:

buy U.S. Treasury securities from the public.

Credit cards are:

not part of the money supply

The name given to the fraction of deposits that a bank is legally required to hold in its vault, or as deposits at the Fed, is __________.

required reserves

When we say that one of the functions of the Fed is to be a lender of last resort, we mean that the Fed:

provides funds to troubled banks that cannot find any other source of funds.

Suppose that the reserve ratio is 25% and that banks loan out all their excess reserves. If a person deposits $100 cash in a bank, checking account balances will increase by a maximum of:

$400

The theory concerning the link between the money supply and the price level that assumes the velocity of money is constant is called the:

quantity theory of money.

Which of these predictions can be made using the growth rates associated with the quantity equation?

If the money supply grows at a faster rate than real GDP, there will be inflation.

The sum of all currency in the hands of the public plus demand deposits and other checkable deposits plus traveler's checks is the official definition of:

M1

The Board of Governors of the Federal Reserve has _________ members that are appointed for staggered _________ by the __________ and confirmed by the Senate.

Seven, 14-year terms, President

Which of these facts is true about the creation of the Federal Reserve System (the Fed)?

The Fed was created in 1913

Assuming there are no leakages out of the banking system, a money multiplier equal to 5 means that:

each additional dollar of reserves creates $5 of deposits

On the balance sheet of a bank:

loans are the most important asset.

Assume that banks are always fully loaned and people hold no cash. Given a required reserve ratio of 10%, an infusion of $100 billion in reserves will result in a maximum of:

$1,000 billion in deposit

Suppose that velocity is 3 and the money supply is $500 million. According to the quantity theory of money, nominal output equals:

$1.5 billion.

to increase the money supply, the FOMC directs the trading desk located at the Federal Reserve Bank of New York to:

buy U.S. Treasury securities from the public.