Econ Chapter 15

We know how many dollars banks create using the:

money multiplier.

If the reserve ratio was 100 percent, then:

no lending would occur using deposits.

The money multiplier is approximated as being equal to:

one divided by the reserve ratio.

The goal of expansionary monetary policy is to:

reduce interest rates to stimulate the economy.

The amount that the bank is legally required to keep on hand is called the:

required reserves.

The money supply is the amount of money:

available in the economy.

If the reserve ratio is 5 percent, then the money multiplier is approximated to be:

20

If the money multiplier is approximated to be 2, then the reserve ratio must be:

50 percent.

The narrowest definition of money:

All of these are true.

In the United States, the central bank is the:

Federal Reserve.

We say that money is a store of value because it represents:

a certain amount of purchasing power held over time.

If the Fed wishes to increase the money supply, it could:

buy bonds.

If the Fed wanted to increase the money supply, they could:

decrease the reserve requirement, reducing the reserve ratio.

In order to change the money supply, the Fed might use all of the following tools except:

deficit spending.

Liquidity refers to how:

easy an asset is to convert immediately to cash without losing value.

The Fed classifies different types of money depending on its:

liquidity.

Banks create money in the economy by:

loaning out part of each deposit, which will be redeposited by someone else.

One of the main roles of a central bank is:

managing the nation's money supply.

One of the functions of money is to serve as a:

medium of exchange.

The chairman of the Federal Reserve is considered one of the most important economic positions in the world because this person has significant direct control over the conduct of:

monetary policy in the United States.

The larger is the reserve ratio, the:

smaller is the money multiplier, and the less money will be created in the economy.

Money has replaced the need to barter, which is:

something you can directly offer, like any good or service, in exchange for some good or service you want.

Monetary policy primarily influences the economy through changes in:

the interest rate.

The primary way that banks earn money is:

through lending funds and collecting interest on those loans.

The twin responsibilities of the Federal Reserve are:

to ensure price stability and maintain full employment.