macro econ ch 13
basic money supply or m1 includes
currency in circulation, transactions accounts, and travelers checks
Which of the following is not correct about the money kept in transactions accounts?
it's backed by gold held by the govt
various money supply measures M1 and M2 are used to distinguish the
liquidity and accessibility of assets
first national bank has zero excess reserves. ceteris paribus, if the required reserve ratio increases, which will happen immediately
the bank won't have enough required reserves
when cash or coins are initially deposited into a bank
the composition of the money supply changes, but the size of the money supply does not change
which is not considered private depository institution
the federal reserve
If total reserves for a bank are $25,000, excess reserves are $5,000, and demand deposits are $100,000, the money multiplier must be
5
suppose Jason takes $150 he had in his wallet and deposits into his checking account. the immediate result of his transaction is that M1 and
M2 do not change
required reserves represent
a leakage frm the flow of money
Which of the following is not included in transactions accounts?
a money market mutual fund
the direct exchange of one good for another
is barter
Which of the following reflects the concept of fractional reserves?
money multiplier is greater than one
the ratio of the banks total reserves to its total transactions deposits is known as the
reserve ratio
Which of the following explains why banks try to keep their holdings of excess reserves low?
to maximize profits
excess reserves are
total reserves less required reserves
which isnt included in M2
treasury bills
Traveler's checks are included in which of the following?
both m1 and m2
an essential function for a bank is to
create money through lending
Suppose a banking system has $200 million in deposits, a required reserve ratio of 10 percent, and total bank reserves of $35 million. Then the potential increase in deposit creation for the whole banking system is equal to
$150 million
Suppose a bank has $160,000 in deposits and a required reserve ratio of 10 percent. Then required reserves are
$16,000
If excess reserves are $10,000, demand deposits are $100,000, and the required reserve ratio is 10 percent, then total reserves are
$20,000
Suppose a bank has $2 million in deposits, a required reserve ratio of 10 percent, and total reserves of $500,000. Then it has excess reserves of
$300,000
Refer to Table 13.2. With total reserves of $80,000 and a required reserve ratio of 25 percent, ABC Bank could support maximum transactions account balances of
$320,000
Suppose a bank has $1 million in deposits, a required reserve ratio of 25 percent, and total reserves of $600,000. Then it has excess reserves of
$350,000
Suppose a banking system has $120 million in deposits, a required reserve ratio of 20 percent, and total bank reserves for the whole system of $100 million. Then the potential increase in deposit creation for the whole system is equal to
$380 million
A single bank with $10,000 of reserves and a reserve ratio of 25 percent could support total transactions account balances of at most
$40,000
If the banking system has demand deposits of $100,000, total reserves equal to $15,000, and a required reserve ratio of 10 percent, the banking system can increase the volume of loans by a maximum of
$50,000
Refer to Table 13.1. With a required reserve ratio of 12 percent, XYZ Bank would have excess reserves of
$52,000
Suppose a bank has $600,000 in deposits, a required reserve ratio of 5 percent, and bank reserves of $90,000. Then the bank can make new loans in the amount of
$60,000
Suppose a bank has $100,000 in deposits, a required reserve ratio of 20 percent, and total reserves of $20,000. Then this bank can make new loans in the amount of
0
If the banking system has a required reserve ratio of 20 percent, the money multiplier is
5.0
The primary purpose of both the FDIC and the Savings Association Insurance Fund (SAIF) is to
Increase depositor confidence in the banking system.
Which of the following is included in M1?
balances in transactions accounts
suppose university bank has zero excess reserves. if the required reserve ratio decreases, the
bank will e able to make more loans
which of the following is not included in any of the measures of the money supply
cash in the vault of a commercial bank
a higher reserve requirement
further limits deposit creation
what isn't a constraint on deposit creation
interest rate falls, making borrowing less costly for businesses and consumers
what isn't true about barter
it allows people to obtain more goods than they would under a money payment system
when a bank makes a loan,
it creates a transactions account balance for the borrower
money is func. as a standard of value when you
use it to compare two houses that are different prices
