money, banking, & Monetary Policy econ 111
The M1 money supply includes which of the following? Currency (paper/coin money) Demand Deposits (checking accounts) Other Checkable Deposits (e.g., travelers' checks) Savings Accounts Certificates of Deposits (CDs) Money Market Mutual Funds Gold Valuable Paintings Stocks & Bonds
1. Currency (paper/coin money) 2. Demand Deposits (checking accounts) 3. Other Checkable Deposits (e.g., travelers' checks)
Members of the Fed's Board of Governors each serve how many years per (non-repeatable) term on the Board? # years
14
Consider the money multiplier effect. If the required reserve ratio is 25%, what is the final money supply resulting from an original deposit of $41,000?
164,000
Consider the money multiplier effect. If the required reserve ratio is 1%, what is the final money supply resulting from an original deposit of $26,000? $
2,600,000
Consider the money multiplier effect. If the required reserve ratio is 5%, what is the value of the money multiplier? Money Multiplier =
20
Consider the money multiplier effect. If the required reserve ratio is 4%, what is the value of the money multiplier? Money Multiplier =
25
Consider the money multiplier effect. If the required reserve ratio is 25%, the original deposit is $16,000, and the final money supply is $64,000, then what is the amount of money created by the (money multiplier) process? $
48,000
Consider the money multiplier effect. If the required reserve ratio is 20%, what is the value of the money multiplier? Money Multiplier
5
Consider the money multiplier effect. If the required reserve ratio is 1%, the original deposit is $6,000, and the final money supply is $600,000, then what is the amount of money created by the (money multiplier) process?
594,000
How frequently does the FOMC regularly meet to discuss policy (not including emergency meetings)? Every weeks
6 weeks
Consider the money multiplier effect. If the required reserve ratio is 20%, the original deposit is $21,000, and the final money supply is $105,000, then what is the amount of money created by the (money multiplier) process?
84000
In which definition of the money supply are checking accounts counted?
Both M1 and M2
In which definition of the money supply are travelers' checks counted?
Both M1 and M2
In which definition of the money supply is currency (paper/coin money) that is in circulation counted? M1 only M2 only Both M1 and M2 Neither M1 nor M2
Both M1 and M2
What is the most liquid asset?
Cash (paper/coin currency)
Gold, silver, salt, spices, beaver pelts, and cigarettes (in prison) are all examples of what?
Commodity Money
When a commodity with actual intrinsic value is used as money (or to back the value of money) in an economy, that is known as what?
Commodity Money
The Federal Reserve is said to be a "quasi-independent" institution. Who has INDIRECT oversight of the Federal Reserve (by granting them their powers)?
Congress & the President
The M2 money supply includes which of the following? Currency (paper/coin money) Demand Deposits (checking accounts) Other Checkable Deposits (e.g., travelers' checks) Savings Accounts Certificates of Deposits (CDs) Money Market Mutual Funds Gold Valuable Paintings Stocks & Bonds
Currency (paper/coin money) Demand Deposits (checking accounts) Other Checkable Deposits (e.g., travelers' checks) Savings Accounts Certificates of Deposits (CDs) Money Market Mutual Funds
Money with NO intrinsic value is known as what?
Fiat Money
Consider the money multiplier effect. If the required reserve ratio is 2%, what is the final money supply resulting from an original deposit of $46,000?
Fibak money supply = (1/rr) * original deposit 1/.02*46,000=2,300,000
The Fed's so-called "Dual Mandate" refers to which 2 of the Fed's 3 overall goals?
High economic growth/low unemployment Price stability (keep inflation low)
he current Chair of the Federal Reserve is whom?
Jerome Powell
How easily an asset can be sold/exchanged for cash is known as that asset's what?
Liquidity
Suppose you move $1000 from your checking account to your savings account. (a) How does this impact the M1 money supply? M1 increases M1 decreases M1 does not change (b) How does this impact the M2 money supply M2 increases M2 decreases M2 does not change
M1 decreases M2 does not change
Suppose you deposit $1000 in cash into your savings account. (a) How does this impact the M1 money supply? M1 increases M1 decreases M1 does not change (b) How does this impact the M2 money supply M2 increases M2 decreases M2 does not change
M1 decreases M2 does not change
Suppose you deposit $1000 in cash into your checking account. (a) How does this impact the M1 money supply? M1 increases M1 decreases M1 does not change (b) How does this impact the M2 money supply M2 increases M2 decreases M2 does not change
M1 does not change M2 does not change
In which definition of the money supply are money market mutual funds counted?
M2 only
In which definition of the money supply are savings accounts counted?
M2 only
Money provides convenience in that it is what we use to buy goods and services. This is an example of which of the 4 roles of money?
Medium of Exchange
Macroeconomic policy that operates by controlling the money supply is known as what?
Monetary Policy
In which definition of the money supply are stocks and bonds counted?
Neither M1 nor M2
In which definition of the money supply is currency (paper/coin money) that is INSIDE BANK VAULTS counted?
Neither M1 nor M2
In which definition of the money supply is gold counted?
Neither M1 nor M2
The Chair of which Regional Fed has a permanent seat on the Federal Open Market Committee (FOMC)?
New York
West Chester is within District 3 of the Federal Reserve, which is based where?
Philadelphia
Money allows people to transfer dollars, and therefore purchasing power, into the future. This is an example of which of the 4 roles of money?
Store of Value
In the US, who is in charge of PRINTING money?
The Department of the Treasury
Who controls the money supply?
The Federal Reserve
The US's central bank is known as what?
The Federal Reserve`
When an economy uses gold as currency (or backs their currency with gold), that is known as what?
The Gold Standard
The interest rate that independent banks charge each other on loans is known as what?
The Interbank Lending Rate
The minimum percentage of a bank's liabilities that it's required to keep on hand is known as what?
The Required Reserve Ratio
Which of the following are the tools of monetary policy?
The Required Reserve Ratio Open Market Operations (Buying/Selling Bonds) The Discount Rate
Money provides a common unit in which all prices and listed and all debts are recorded. This is an example of which of the 4 roles of money?
Unit of Account
The Federal Reserve is meant to be
apolitical
Fractional reserve banking is what allows for money to be created and destroyed. Every time a loan is made, money is . Every time a loan is repaid, money is .
created destroyed
The key component of a balance sheet, such as the T-account balance sheet we used in class, is that assets must liabilities.
equal
Today, the US Dollar is said to be what?
fiat money?
The interbank lending rate is the ? discount rate.
less than
The Federal Reserve is said to be a "quasi-independent" institution. Who has DIRECT oversight of the Federal Reserve?
no one
The following is a simple version of a T-account balance sheet for Bank 1. Bank 1 has a total of $18,000 in assets. The required reserve ratio is 1%. Assume that Bank 1 holds no excess reserves. Fill in the blanks for the amount of money for each blank category (total assets, reserves, loans, total liabilities, and deposits). Bank 1 Assets Liabilities Reserves: $ Deposits: $ Loans: $ Total Assets: $ Total Liabilities: $
reserves 180 loans 17,820 total assets 18,000 deposit 18,000 total liability 18,000
The interest rate that the Federal Reserve charges independent banks on loans is known as what?
the discount rate
All markets have four important pieces: quantity, price, supply, and demand. In the market for money, quantity is and price is . The demand for money (MD) , while the money supply (MS) because it is directly set by the Fed.
the quantity of money in an economy the interest rate in the economy has a negative slope is a vertical line
