Macro ch 14

If the required reserve ratio is 10% and the Fed conducts an open market purchase of $100, what is the maximum possible change in the money supply? $100 $1,000 $10,000 $10

$1000

Suppose your grandma sends you $100 for your birthday and you deposit it in your checking account. The reserve ratio is 10%. Based upon this deposit, the bank's reserves have increased by _____ and the bank's checkable deposits have increased by _____. $100; $100 $100; $90 $90; $100 $10; $100

$100; $100

Suppose a bank gets a new deposit of $100 cash and it has a 20% required reserve ratio. If the bank lends the maximum amount of money allowed, then the checkable deposits (including the original deposit) increase by: $20. $100. $500. $1,000

$500

First National Bank has $80 million in checkable deposits, $15 million in deposits with the Federal Reserve, $5 million cash in the bank vault, and $5 million in government bonds. Reference: Ref 14-11 (Scenario: First National Bank) Look at the scenario First National Bank. The bank has liabilities of: $105 million. $95 million. $80 million. $100 million.

$80 million

Which of the following is a function of the Federal Reserve System? I. conducting fiscal policy II. examining and supervising commercial banks in the Fed regions III. evaluating corporate mergers I only II only III only I,II, and III

II only

Included in M1 are: checkable bank deposits. savings deposits. U.S. Treasury bills. demand deposits, savings deposits, and U.S. Treasury bills.

checkable bank deposits

Which of the following assets is the MOST liquid? checkable bank deposits currency stocks money market mutual funds

currency

If the Fed conducts an open-market sale, bank reserves _____ and the money supply is likely to _____. increase; increase increase; decrease decrease; increase decrease; decrease

decrease; decrease

Loans of reserves from one bank to another are made in the _____ market. commodity foreign exchange stock federal funds

federal funds

The U.S. dollar is defined as: fiat money, because it was established as money by an act of law. faith money, because we trust the government to defend its value. commodity-backed money, because it is convertible to gold. commodity money, because it is widely used to buy commodities.

fiat money, because it was established as money by an act of law

The reserve requirement is 10% and Jack withdraws $5,000 travel money from his checkable deposit. Assume that banks do not hold any excess reserves and that the public holds no currency, only checkable bank deposits. Reference: Ref 14-6 (Scenario: Money Supply Changes) Look at the scenario Money Supply Changes. As a result of the withdrawal, excess reserves _____ by _____. increase; $5,000 increase; $500 decrease; $4,500 decrease; $500

increase; $500

Suppose the Federal Reserve buys $50 million in Treasury bills from commercial banks. If the reserve ratio is 10%, the monetary supply might eventually _____ by _____. increase; $500 million increase; $450 million decrease; $450 million decrease; $500 million

increase; $500 million

To _____ the money supply, the Federal Reserve could _____. decrease; lower the reserve requirements increase; lower the discount rate increase; conduct open-market sales decrease; lower the federal funds rate

increase; lower the discount rate

Among the assets of a bank are: customers' deposits. loans. customers' borrowings. deposits and loans.

loans

When a bank deposit is withdrawn and kept as currency, bank reserves decrease and the: monetary base decreases. monetary base does not change. monetary base increases. money supply decreases.

monetary base does not change

Bank runs in the United States during the 1930s damaged the economy because: capital requirements prevented bank managers from taking additional lending risks. the reserve ratio was set too high. the Federal Reserve system did not exist at the time. the loss of confidence at one bank quickly extended to other banks.

the loss of confidence at one bank quickly extended to other banks

Holding everything else constant, if the required reserve ratio falls: the money multiplier increases. a $1 loan can lead to a smaller change in the money supply than before the change in the required reserve ratio. the amount of excess reserves falls also. the money multiplier decreases.

the money multiplier increases

Capital requirements for banks serve all of the following purposes EXCEPT: to reduce a bank owner's incentive for excessive risk taking. to offset the change in incentives caused by deposit insurance. to put to use the excess of a bank's assets over its deposits and other liabilities. to reduce deposits

to reduce deposits

"Tuition at State University this year is $8,000." Which function of money does this statement best illustrate? store of value medium of exchange unit of account means of deferred payment

unit of account