4.03 Money in the Bank

Which of the following best explains why raising the required reserve ratio results in a decrease in the money supply?

Banks must loan out a smaller portion of their reserves, resulting in fewer loans.

Which most accurately explains why commodity money has value?

Commodity money is a good that can be used as a medium of exchange or for some other purpose.

Which best explains how a barter system works?

Goods and services are exchanged without the use of money.

Which of the following best explains why Treasury bonds have an effect on the size of the money supply?

The Federal Reserve Bank can buy and sell these bonds to raise or lower bank deposits.

Which action is most likely to result in a decrease in the money supply?

The government sells a new batch of Treasury bonds.

Which of the following best describes how the Federal Reserve Bank helps banks during a bank run?

can provide a short-term loan to banks to prevent them from running out of money

Which is a form of fiat money that is commonly used today?

digital money

Which of the following explains why the government sets a required reserve ratio for private banks?

make sure banks don't run out of money when customers make withdrawals

Which of the following best describes monetary policy?

managing the economy by controlling the money supply

Which is a balance sheet?

statement of financial position