ECO 202 Chapter 16

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If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate

$10,000 of money

If the reserve ratio is 4 percent, then the money multiplier is

25

Which of the following does the Federal Reserve not do?

Conduct fiscal policy

Which list ranks assets from most to least liquid?

Currency, stocks, houses

You receive money as payment for mowing your neighbor's lawn. Which function of money does this best illustrate?

Medium of exchange

Which of the following is included in M2?

Money market mutual funds

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a _______. The laptop's price is posted as $500. The $500 price illustrates money's function as a _____. You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______.

store of value, unit of account, medium of exchange

Which of the following best represents fiat money?

the euro

The discount rate is

the interest rate the Fed charges banks

Bank capital is

the resources that owners have put into the bank

Which of the following increases when the Fed makes open-market sales?

Neither currency nor reserves

Which of the following is not a function of money?

Protection against inflation

Which of the following is not included in M1?

Savings deposits

Which of the following is included in M2 but not in M1?

Small time deposits

Which of the following groups meets to discuss changes in the economy and determine monetary policy?

The Federal Open Market Committee

Which of the following is not an example of monetary policy?

The Federal Reserve facilitates bank transactions by clearing checks

When you list prices for necklaces sold on your website, www.sparklingjewels.com, in dollars, this best illustrates money's function as

a unit of account

The federal funds rate is the

interest rate at which banks lend reserves to each other overnight

When colonists in Virginia used tobacco as money, their money

was commodity money

The measure of the money stock called M1 includes

wealth held by people in currency


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