econ

Suppose Chandler changes his $1,000 demand deposit from Bank A to Bank B. If the reserve ratio is 10 percent, what is the potential change in demand deposits as a result of Chandler's action?

$10,000

Suppose the Fed purchases a $1,000 government bond from you. If you deposit the entire $1,000 in your bank, what is the total potential change in the money supply as a result of the Fed's action if reserve ratio is 10 percent?

10,000

If the reserve ratio is 20 percent, the value of the money multiplier is _______.

5

Which of the following statements about monetary policy is true?

?The Fed has precise control of the money supply.

Which of the following statements about a bank's balance sheet is true?

Assets minus liabilities equals owner's equity or capital.

Which of the following policy combinations would consistently work to increase the money supply?

Buy government bonds, decrease interest paid on reserves, decrease the discount rate

Which of the following policy actions by the Fed is likely to increase the money supply?

Decreasing interest on reserves

Which of the following is not a function of money?

Protection against inflation

Which of the following statements is true?

When the Fed buys government bonds, the money supply increases.

An example of fiat money is _______.

a U.S. twenty-dollar bill

The Board of Governors of the Federal Reserve System consists of _______.

a. up to seven members appointed by the president

The M1 money supply is composed of _______.

currency, demand deposits, and other liquid balances at banks such as savings accounts

If the Fed engages in an open-market purchase, and at the same time, it raises reserve requirements, _______.

d. we cannot be certain what will happen to the money supply

The reserve ratio is the ratio of a bank's reserves to its _______

deposits

Suppose all banks maintain a 100 percent reserve ratio. If an individual deposits $1,000 of currency in a bank, _______.

e. the money supply is unaffected

Commodity money _______.

has intrinsic value

The Fed's tools of monetary control are _______.

open-market operations, lending to banks, reserve requirements, and paying interest on reserves

To insulate the Federal Reserve from political pressure,

the board of governors in appointed to 14 year terms

The discount rate is _______.

the interest rate the Fed charges on loans to banks

If banks increase their holdings of excess reserves, _______

the money multiplier and the money supply decrease