Macro Final

+$1,000

A bank balance sheet consists of only these items: What is the value of bank capital?

assets used for transactions.

Economists use the term money to refer to:

above the legally required amount.

Excess reserves are reserves that banks keep:

no effect

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Fed reduces its lending to banks through its Term Auction Facility. (Options: May increase or decrease, no effect, increase, decrease) MONEY MULTIPLIER?

decrease

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Fed reduces its lending to banks through its Term Auction Facility. (Options: May increase or decrease, no effect, increase, decrease) MONEY SUPPLY?

increase

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Federal Reserve buys bonds using open market operations. (Options: May increase or decrease, no effect, increase, decrease) MONETARY BASE?

No effect

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Federal Reserve buys bonds using open market operations. (Options: May increase or decrease, no effect, increase, decrease) MONEY MULTIPLIER?

decrease

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Federal Reserve buys bonds using open market operations. (Options: May increase or decrease, no effect, increase, decrease) MONEY SUPPLY?

(cr + 1)/(cr + rr)

If the monetary base is denoted by B, rr is the ratio of reserves to deposits, and cr is the ratio of currency to deposits, then the money supply is equal to _____ multiplied by B.

10 percent

Based on the table, what is the reserve-deposit ratio at the bank?

increase the ratio of currency to deposits.

If many banks fail, this is likely to:

$800 billion.

If the monetary base equals $400 billion and the money multiplier equals 2, then the money supply equals:

currency-deposit ratio increases.

The money supply will decrease if the:

money market deposit accounts.

All of these assets are included in M1 EXCEPT:

1000

An economy has a monetary base of 1,000 $1 bills. All money is held as currency. Money supply = $ ?

loans to customers.

Assets of banks include:

store of value, medium of exchange

Assign the correct functions of money to each example below. Note that more than one function may be assigned to a box. (Options: Demand deposit, medium of exchange, store of value, reserve holding, unit of account) A CREDIT CARD?

store of value

Assign the correct functions of money to each example below. Note that more than one function may be assigned to a box. (Options: Demand deposit, medium of exchange, store of value, reserve holding, unit of account) A REMBRANDT PAINTING?

store of value, medium of exchange, unit of account

Assign the correct functions of money to each example below. Note that more than one function may be assigned to a box. (Options: Demand deposit, medium of exchange, store of value, reserve holding, unit of account) A STARBUCKS GIFT CARD?

amount of gold.

In a country on a gold standard, the quantity of money is determined by the:

all banks must hold reserves equal to a fraction of their deposits.

In a system with fractional-reserve banking:

credit cards; debit cards

Payment is deferred by using _____, but immediate access to funds occurs when using _____.

hold money to transfer purchasing power into the future.

People use money as a store of value when they:

no effect

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. Rumors about a computer virus attack on ATMs increase the amount of money people hold as currency rather than demand deposits. (Options: May increase or decrease, no effect, increase, decrease) MONETARY BASE?

decrease

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. Rumors about a computer virus attack on ATMs increase the amount of money people hold as currency rather than demand deposits. (Options: May increase or decrease, no effect, increase, decrease) MONEY MULTIPLIER?

decrease

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. Rumors about a computer virus attack on ATMs increase the amount of money people hold as currency rather than demand deposits. (Options: May increase or decrease, no effect, increase, decrease) MONEY SUPPLY?

increase

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Fed flies a helicopter over 5th Avenue in New York City and drops newly printed $100 bills.(Options: May increase or decrease, no effect, increase, decrease) MONETARY BASE?

may increase or decrease

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Fed flies a helicopter over 5th Avenue in New York City and drops newly printed $100 bills.(Options: May increase or decrease, no effect, increase, decrease) MONEY MULTIPLIER?

increase

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Fed flies a helicopter over 5th Avenue in New York City and drops newly printed $100 bills.(Options: May increase or decrease, no effect, increase, decrease) MONEY SUPPLY?

increase

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Fed increases the interest rate it pays banks for holding reserves.(Options: May increase or decrease, no effect, increase, decrease) MONETARY BASE?

decrease

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Fed increases the interest rate it pays banks for holding reserves.(Options: May increase or decrease, no effect, increase, decrease) MONEY MULTIPLIER?

decrease

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Fed increases the interest rate it pays banks for holding reserves.(Options: May increase or decrease, no effect, increase, decrease) MONEY SUPPLY?

decrease

For each event described, determine the affect on the monetary base, the money multiplier, and the money supply. The Fed reduces its lending to banks through its Term Auction Facility. (Options: May increase or decrease, no effect, increase, decrease) MONETARY BASE?

business policies of banks and the laws regulating banks.

The reserve-deposit ratio is determined by:

conduct open-market purchases.

To increase the monetary base, the Fed can:

sells government bonds.

To reduce the money supply, the Federal Reserve:

A store of value, a medium of exchange, a unit of account

What are the three functions of money?

unit of account.

When a pizza maker lists the price of a pizza as $10, this is an example of using money as a:

a competitive bidding process.

When banks borrow through the Term Auction Facility, the price of borrowing is determined by:

decreases the reserve-deposit ratio (rr).

When the Fed decreases the interest rate paid on reserves, it: