Econ

The amount of U.S. currency held by people and nonbank firms is enough for every man, woman, and child in the United States to have approximately how much currency?

$5,200

Which of the following statements is FALSE? The money multiplier is the amount by which the money supply expands with each dollar increase in reserves.The money supply will increase by more than the initial change in reserves.Banks earn profits on deposits.Banks hold reserves according to the law and the Federal Reserve as well as to meet ordinary depositor demands for currency and payment services.

Banks earn profits on deposits.

Which of the following statements is FALSE? Banks earn profits on loans. The money multiplier is the amount by which the money supply expands with each dollar increase in reserves. The money supply will increase by more than the initial change in reserves. Banks hold reserves only to meet ordinary depositor demands for currency and payment services.

Banks hold reserves only to meet ordinary depositor demands for currency and payment services.

The world's largest bank customer is the: Board of Governors. Federal Reserve. Internal Revenue Service. U.S. Treasury.

U.S. Treasury.

M1 and M2: were approximately equal in 2020. have no components in common. have the most significant effects on aggregate demand. are directly controlled by the Fed.

have the most significant effects on aggregate demand.

What effect does a decrease in reserves have on the money supply?

it decreases bot M1 and M2

The size of the money multiplier is: not fixed but depends on how much of their assets banks want to hold as reserves. not fixed but is set by the Federal Reserve. not fixed but depends on interest rates. equal to 2.

not fixed but depends on how much of their assets banks want to hold as reserves.

If the Fed buys bonds in an open market operation, the LRAS growth curve will: shift to the right. shift to the left. not shift. shift upward.

not shift.

Of the following assets, which is the LEAST liquid? currency savings deposits checkable deposits reserves held by banks at the Fed

savings deposits

The idea of moral hazard is that when individuals or institutions are insured, they tend to: take on too much risk. spend too much. expect lower prices. borrow too much.

take on too much risk

Which of the following is NOT something that the Fed will try to predict and monitor to estimate the effect of its actions on aggregate demand? whether businesses that borrow will hold the money as a precaution against bad times. whether businesses that borrow will promptly buy capital and hire labor. how low short-term interest rates have to go before they stimulate more investment borrowing. whether the next Fed chairperson will be appointed by a Republican or Democratic president

whether the next Fed chairperson will be appointed by a Republican or Democratic president

If the Fed increases bank reserves by $5,000 and the banking system has a reserve ratio of 1/10, what is the change in the money supply?

$50,000

Which factor(s) help(s) to reduce the potential economic consequences of banks facing a liquidity problem? I. the existence of the FDIC II. the Fed's role as lender of last resort III. the existence of the Federal Open Market Committee

I and II

Which of the following statements is TRUE? The Fed acts as a lender of first resort. An insolvent bank has liabilities that are smaller than its assets. Moral hazard occurs when banks and other financial institutions take on too little risk, hoping that the Fed and regulators will later bail them out. Systemic risk is the risk that the failure of one financial institution will brterm-11ing down other institutions as well.

Systemic risk is the risk that the failure of one financial institution will bring down other institutions as well.

Which of the following statements is TRUE? The Fed has only indirect control over the monetary base. A liquid asset can't be used for payments or can't, quickly and without loss of value, be made usable for payments. The M2 money supply includes M1 plus savings deposits, money market mutual funds, and small-time deposits. Money is a universally accepted means of payment.

The M2 money supply includes M1 plus savings deposits, money market mutual funds, and small-time deposits.

Which of the following statements statement are TRUE? The reserve ratio is determined primarily by how liquid banks wish to be. The money multiplier is the ratio of reserves to deposits. When banks are worried that depositors might want to withdraw their cash or when loans don't seem profitable, they want a reserve ratio that is relatively low. If banks want a reserve ratio of 1/10, then when the Federal Reserve increases reserves by $1,000, deposits must ultimately increase by $100.

The reserve ratio is determined primarily by how liquid banks wish to be.

If the Fed wants to decrease interest rates, it should: sell bonds in open market operations. recall bonds in open market operations. issue bonds in open market operations. buy bonds in open market operations.

buy bonds in open market operations.

ΔReserves × MM equals the:

change in the money supply

What is something that the Federal Reserve does? calculate labor market statistics, such as the unemployment rate set marginal tax rates print money to finance government spending manage the nation's check payment system

manage the nation's check payment system

What does (1 ÷ RR) equal?

the money multiplier

The MOST important and influential part of the Fed system is the: Federal Open Market Committee. regional Federal Reserve Bank presidents. directors of the regional Federal Reserve Banks. Board of Governors.

Federal Open Market Committee.

The monetary base (MB) includes: total reserves held at the Fed only. currency only. currency and checkable deposits. currency and total reserves held at the Fed.

currency and total reserves held at the Fed.

Which number is the largest? the number of Governors of the Federal Reserve System the length in years of an appointment as chairperson of the Federal Reserve Board of Governors the number of directors of each regional Federal Reserve Bank the number of members on the Federal Open Market Committee

the number of members on the Federal Open Market Committee

Savings deposits, money market mutual funds, and small-time deposits are like checkable deposits in that _____, but unlike checkable deposits in that _____. they may be used to pay for goods and services; to do so typically requires a little bit of extra work they are part of M1; they are also part of M2 they are very liquid; they cannot be used to pay for goods and services they require no time to reach maturity; they are very liquid

they may be used to pay for goods and services; to do so typically requires a little bit of extra work

Why does so much U.S. currency exist? Actually, not that much U.S. currency exists Saddam Hussein stockpiled U.S. currency, and as it disappeared from circulation, the Fed kept printing new currency. The average man, woman, or child in the United States typically carries approximately $5,000 in cash. U.S. dollars are the official currency in some other countries and an unofficial currency in others.

U.S. dollars are the official currency in some other countries and an unofficial currency in others.

Buying bonds in _____ would _____ aggregate demand.

an open market operation; increase