ECON 1: MONEY SUPPLY

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The U.S. dollar can best be described as

flat money

Which of the following assets is most​ liquid?

money

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

Which tool is the most​ important?

The Fed conducts monetary policy principally through open market operations.

The central bank of a country controls the money​ supply, which equals the currency held by

the public plus their checking account balances.

When the Federal Reserve purchases Treasury securities in the open​ market,

the sellers of such securities deposit the funds in their banks and bank reserves increase.

Credit cards are

included in neither the M1 definition of the money supply nor in the M2 definition.

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

store of value

When the Federal Reserve sells Treasury securities in the open​ market,

the buyers of these securities pay for them with checks and bank reserves fall.

Soldiers in a World War II​ prisoner-of-war camp

used cigarettes as money.

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

​increases; increases

Which of the following is a monetary policy tool used by the Federal Reserve​ Bank?

+ Decreasing the rate at which banks can borrow money from the Federal Reserve. + Buying​ $500 million worth of government​ securities, such as Treasury bills. + Increasing the reserve requirement from 10 percent to 12.5 percent.

Which one of the following is not one of the policy tools the Fed uses to control the money​ supply?

Moral suasion.

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

U.S. Treasury securities by the Federal Reserve

The​ statement, "My iPhone is worth​ $700" represents​ money's function as

a unit of account.

A central bank like the Federal Reserve in the United States can help banks survive a bank run by

acting as a lender of last resort.

To decrease the money​ supply, the Federal Reserve could

conduct an open market sale of Treasury securities.

a. The coins in your pocket. b. The funds in your checking account. c. The funds in your savings account. d. The​ traveler's check that you have left over from a trip. e. Your Citibank Platinum MasterCard. Which of the things above are NOT included in the M1 definition of the money​ supply?

c​ & e

To increase the money​ supply, the Federal Reserve could

conduct an open market purchase of Treasury securities.

Distinguish among​ money, income, and wealth.

A​ person's money is the currency held and the checking account​ balance, income is the earning and wealth is equal to value of assets minus all debts.


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