economics final 14-15

Which of the following both increase the money supply?

a decrease in the discount rate and a decrease in the interest rate on reserves

which is not a central bank

bank of america

Which list ranks assets from most to least liquid?

currency, demand deposits, money market mutual funds

Bank regulators impose capital requirements in order to

ensure banks can pay off depositors

the Federal Deposit Insurance Corporation

protects depositors in the event of bank failures.

the leverage ratio is calculated as

assets divided by bank capital

What does the Fed auction at the Term-Auction Facility?

loans of a quantity it sets

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

medium of exchange

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

store of value

A problem that the Fed faces when it attempts to control the money supply is that

the Fed does not control the amount of money that households choose to hold as deposits in banks.

The Fed's control of the money supply is not precise because

the amount of money in the economy depends in part on the behavior of depositors and bankers.

there is a short or long run tradeoff between inflation and unemployment?

there is a short run tradeoff between inflation and unemployment

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.

paper dollars a. are commodity money and gold coins are fiat money. b. are fiat money and gold coins are commodity money. c. and gold coins are both commodity monies. d. and gold coins are both fiat monies.

b. fiat money

today, bank runs are

uncommon bc of FDIC deposit insurance

Suppose a bank is operating with a leverage rate of 10. A 6 percent increase in the value of assets

will result in a 60% increase in owners equity

if the reserve ratio is 12 percent then the money multiplier is

8.3

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

9,500 of new money

During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.

Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease.

Which of the following items is included in M2? a. credit cards b. money market mutual funds c. corporate bonds d. large time deposits

b. money market mutual funds

in a system of 100 percent reserve banking

banks do not make loans

When we say that trade is roundabout we mean that a. people sometimes trade goods for goods. b. trades require a double coincidence of wants. c. currency is accepted primarily to make further trades. d. people must spend time searching for the products they wish to purchase.

c. currency is accepted primarily to make further trades

Which type of money has intrinsic value?

commodity money

The Fed's primary tool to change the money supply is

conducting open market operations

Which of the following is correct? a. The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. b. The Federal Reserve has 14 regional banks. The Board of Governors has 7 members who serve 14-year terms. c. The Federal Reserve has 12 regional banks. The Board of Governors has 12 members who serve 7-year terms. d. The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms.

d. federal reserve has 12 regional banks. board of governors has 12 members who serve 7 year terms

If the public decides to hold more currency and fewer deposits in banks, bank reserves

decrease and the money supply eventually decreases

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

decrease by $25.5 million and the money supply eventually decreases by $170 million

In a fractional-reserve banking system, an increase in reserve requirements

decreases both the money multiplier and the money supply

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

decreases the money multiplier and decreases the money supply