Chapter 14

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Suppose the reserve requirement is 5​%. What is the effect on total checkable deposits in the economy if bank reserves increase by ​$50 ​billion?

$1,000x(1/RR)=$10,000

The U.S. dollar can best be described as

fiat money.

Which of the following is true with respect to Irving​ Fisher's quantity​ equation, MxV=PxY

All the above

In a fractional reserve banking system LOADING...​, what is the difference between a​ "bank run" and a​ "bank panic?"

A bank run involves one​ bank; a bank panic involves many banks.

The United States is divided into __ Federal Reserve Districts. The Federal Reserve​ Bank's Board of Governors consists of __ members appointed by the president of the U.S. to​ 14-year, ​ non-renewable terms.

12 - 7 - 4

Which of the following is NOT a function of​ money?

Acceptability

The figure to the right shows a breakdown of the M1 definition LOADING... of the money supply in 2017. Which area corresponds to the amount of checking account​ deposits?

C

Which of the following is a monetary policy LOADING... tool used by the Federal Reserve​ Bank?

Decreasing the rate at which banks can borrow money from the Federal Reserve. Increasing the reserve requirement from 10 percent to 12.5 percent. Buying​ $500 million worth of government​ securities, such as Treasury bills.

Evaluate the following​ statement: Banks use deposits to make consumer loans to households and commercial loans to businesses. Banks will loan out every penny of their deposits in order to make a profit.

False. Banks must hold a fraction of their deposits as vault cash or with the Federal Reserve.

Which of the following is true with respect to ​hyperinflation?

It is caused by central banks increasing the money supply at a rate much greater than the growth rate of real GDP. In the presence of​ hyperinflation, firms and households avoid holding money. It can be hundreds -even thousands- of percentage points per year.

According to the quantity theory of money LOADING...​, inflation results from which of the​ following?

The money supply grows faster than real GDP.

The use of money

allows for greater specialization. reduces the transaction costs of exchange. eliminates the double coincidence of wants.

Credit cards are

included in neither the M1 definition of the money supply nor in the M2 definition.

In addition to the Federal Reserve​ Bank, what other economic actors influence the money​ supply?

​Households, firms, and banks.

The M2 definition of the money supply includes

​M1, savings​ accounts, small time​ deposits, and money markets.


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