ECON110 HW9

9.9. The required reserve ratio is 20%. What is the maximum possible potential deposit multiplier? a. 20 b. 5 c. 2 d. 80

b. 5

9.15. When a central bank buys bonds on the open market, the country's money supply will: a. not change. b. increase, decrease, or sta the same. c. decrease. d. increase.

d. increase.

9.1. Which of the following is not a function of money? a. unit of account b. store of value c. medium of exchange d. open market operations

d. open market operations

9.13. A country's central bank typically does NOT: a. determine the quantity of fiat money in circulation. b. help to regulate the country's banking system. c. serve as a bank for banks. d. serve as a commercial bank for individual depositors.

d. serve as a commercial bank for individual depositors.

9.20) The Fed has complete control over the money supply. True False

False

9.18) Most U.S. currency held outside the U.S. banking system is held by foreigners. True False

True

9.10 The shadow banking system is: a. an underground banking system that is largely illegal b. a system that is outside the regulation system of commercial banks but provides many of the same banking services. c. a secondary system of commercial banks that backs up the primary system of commercial banks. d. the branches of a nation's banks that operate in foreign countries.

b. a system that is outside the regulation system of commercial banks but provides many of the same banking services.

9.8. Bigtown Bank has total deposits of $900 million and total reserve of $150 million. It is subject to a required reserve ratio of 15%. What is the maximum amount of additional loans that Bigtown Bank could lend out today? a. $150 millio b. $135 million c. $15 million d. $90 million

c. $15 million

9.14. _____ is a 12-person group that plays an important role in determining the policy of the Federal Reserve System. a. Board of Governance b. Federal Open Market Committee c. U.S. Congres d. Bank Examiner Committee

b. Federal Open Market Committee

9.19) If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase. True False

False

9.17) In an economy with money, as opposed to barter, people are more likely to specialize in the production of goods and services. True False

True

9.6 A banking system has $900 billion in deposits and $20 billion in excess reserves. The reserve requirement is 10%. How much does the banking system have in total reserves? a. $110 billion b. $90 billion c. $22 billion d. $2 billion

a. $110 billion

9.7 Which of the following equations is correct? a. Total reserves = Required reserves + Excess reserves b. Required reserves = Reserve requirement × Loans c. Required reserves = Excess reserves - Total reserves d. Total reserves = Reserve requirement × Deposits

a. Total reserves = Required reserves + Excess reserves

9.5 ank reserves are: a. not part of M1 or M2. b. part of M2 but not M1. c. M1 plus time deposits. d. part of M1 but not M2.

a. not part of M1 or M2.

9.2 What is the difference between commodity money and fiat money? a. The value of commodity money is set by the government, and the worth of fiat money is based on the material out of which it is made. b. Commodity money is paper bills, and fiat money is coins. c. The value of commodity money is based on the material out of which it is made, and the value of fiat money comes from its acceptance by its users. d. Commodity money is checking accounts, and fiat money is coins and bills.

c. The value of commodity money is based on the material out of which it is made, and the value of fiat money comes from its acceptance by its users.

9.11. Deposit insurance helps to reduce the likelihood of: a. loan defaults. b. loans. c. bank runs. d. money creation

c. bank runs.

9.3 Sam has been saving for his retirement for twenty years. He has a plan and has estimated how much he needs to save each year to provide the standard of living that he wants in retirement. Sam is emphasizing which of the following functions of money as he saves for retirement? a. medium of exchange b. unit of account c. store of value d. reserve deposit

c. store of value

9.4 An asset is liquid when it: a. is able to be converted into another form of asset over time. b. appreciates in value over time. c. can be converted into another form of asset only with notable cost. d. can be converted into money easily, quickly, and without loss of value.

d. can be converted into money easily, quickly, and without loss of value.

9.12. Which is NOT a tool used by the Federal Reserve to control the U.S. money supply? a. open market operations b. discount rate lendin c. interest rate on bank reserve d. deposit insurance

d. deposit insurance

9.16. A change in the required reserve ratio will impact a nation's money supply by changing the: a. denominations of currency that are printed and available to banks. b. amount that is held in excess reserves and the public's willingness to make deposits. c. holdings of overnment bonds by the Federal Reserve and the cost of buying them. d. size of the potential deposit multiplier and the amount that is held in excess reserves.

d. size of the potential deposit multiplier and the amount that is held in excess reserves.