Econ 101 Chapter 18 , 19

Decisions to buy or sell securities at the Fed are made by the:

Federal Open Market Committee.

What establishes the value of fiat money?

None of the above. (wrong)

The required reserves of a bank are:

held as deposits with the Federal Reserve System

The ease with which an asset can be converted into a medium of exchange is known as:

liquidity.

A bank creates money when it:

makes a loan from its excess reserves.

The required reserve ratio is the:

minimum amount of reserves the Fed requires a bank to hold

If banks are fully loaned up, have no excess reserves, and the required reserve ratio is raised, the amount that banks can lend is:

reduced and the money supply contracts.

When the Fed wishes to reduce the economy's money supply, it:

sells some of its government securities

The discount rate is the interest rate charged by:

the Fed on loans of reserves to banks.

Compared to a barter economy, using money increases efficiency by reducing:

transaction costs.