ECO Quiz 5

If the bank has $2000 in deposits and the RRR is 10%, what is the maximum amount they are allowed to loan out?

(2000 x .10 = 1800)

M2 includes M1 plus:

-Savings account balances -Money market deposit accounts in banks -Small denomination time deposits -Non-institutional money market fund shares

The sell of Treasury securities by the federal Reserve will, in general:

Decrease the quantity of reserves held by banks

Kristy deposits $10,000 in her account, RRR=20%, checking account deposits in the banking systems a whole could eventually increase up to a maximum of?

Initial Investment x (1/RRR) 10,000 x (1/.20) = 50,000

The largest proportion of M1 is made up of

Checking account Deposits

Silver is an example of:

Commodity Money

An increase in the discount rate _______ bank reserves and ________ the money supply if the banks respond appropriately to the change in the discount rate.

Decreases; Decreases

Discount Rate

The discount rate is the interest rate the FED charges to banks for loan from the FED.

The statement "This dell laptop costs $1,200" illustrates which function of money?

Unit of account

People hold money as opposed to financial assets because money:

is perfectly liquid