Chapter 4 ECO 3203 Problem Set
In the United States, the money supply is determined:
Jointly by the Fed and by the behavior of individuals who hold money and of banks in which money is held
The use of borrowed funds to supplement existing funds for purposes of investment is called
Leverage
The ratio of money supply to the monetary base is the
Money Multiplier
All are included in M1 except:
Money market deposit accounts
Credit card balances are included in:
Neither M1 or M2
Quantitative easing is most closely akin to
Open market operations
The currency-deposit ratio is determined by
Preferences of households about the form of money they wish to hold
In a 100% reserve banking system, if a customer deposits $100 of currency into a bank then the money supply
Remains the same
The amount of capital that banks are required to hold depends on the
Riskiness of the bank's assets
The size of the monetary base is determined by
The Federal Reserve
High powered money is another name for
The monetary base
Currency equals
The sum of coins and paper money
People use money as a unit of account when they
Use money as a measure of economic transactions
People use money as a medium of exchange when they
Use money to buy goods and services
In the United States, bank reserves consist of
Vault cash and deposits at the Federal Reserve
People use money as a store of value
When they hold money to transfer purchasing power into the future
To make a trade in a barter economy requires
A double coincidence of wants
Banks create money in
A fractional reserve banking system but not a 100% reserve banking system
Economists use the term money to refer to
Assets used for transactions
The reserve-deposit ratio is determined by
Business policies of banks and laws regulating banks
To increase the monetary base, the Fed can
Conduct open market purchase
The money supply will decrease if the
Currency-deposit ratio increases
When the Fed decreases the interest rate paid on reserves, it
Decrease the reserve-deposit ratio
Open Market Operations
Federal Reserve purchases and sales of government bonds
