Econ Chapter 29

If the reserve ratio is 5%, $1,000 of additional reserves can create:

$20,000 of new money

If banks desire to hold no excess reserves, the reserve ratio is 10%, and a bank that was previously just meeting its reserve requirement receives a new deposit of $400, then initially the bank has a:

$360 increase in excess reserves and $40 increase in required reserves

If the reserve ratio is 5%, the money multiplier is

20

Suppose a bank has $200,000 in deposits and $190,000 in loans. It has loaned out all it can. It has a reserve ratio of:

5%

Which of the following executed open-market operations:

NY federal reserve bank

Federal Reserve/Board of governors make up:

The fed reserve has 12 regional banks. The Board of Gov has 7 members who serve 14-year terms

The "yardstick" people use to post prices and record debts is called:

a unit of account

Function of money:

a unit of account, a store of value, medium of exchange

When the Fed decreases the discount rate, banks will:

borrow more from the Fed and lend more to the public. the money supply increases

Demand deposits are a type of:

checking account

The Feds primary tool to change the money supply is:

conducting open market operations

A store of value:

currency, US gov bonds, fine art

If the reserve ratio is 20% and banks do not hold excess reserves and people holy only deposits and not currency, then when the Fed sells $40 mill of bonds to the public, bank reserves:

decrease by $40 mill and the money supply eventually decreases by $200 mill

To increase the money supply, the Fed could:

decrease the reserve requirement

As the reserve ratio increases, the money multiplier:

decreases

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

decreases both the money multiplier and the money supply

Credit cards:

defer payments

A decrease in the money supply creates an excess:

demand for money that is eliminated by falling prices

Current US currency is:

fiat money with no intrinsic value

The existence of money leads to:

greater specialization and a higher standard of living

When a bank loans our $1,000 the money supply:

increases

Over one time horizon or another Fed policy decisions influence:

inflation and employment

Changes in the quantity of money affect:

interest rates, prices, production

When the Fed conducts open-market sales:

it sells Treasury securities, which decreases the money supply

The Fed can directly protect a bank during a bank run by:

lending reserves to the bank

The Federal Reserve does all except:

make loans to individuals

When the money market is drawn with the value of money on the vertical axis, the price level increases if:

money demand shifts left or money supply shifts right

Commodity money is:

money with intrinsic value

The Federal Deposit Insurance Corporation:

protects depositors in the event of bank failures

If the Fed wanted to increase the money supply, it would make open market:

purchases and lower the discount rate

On a banks T-account:

reserves are assets, deposits are liabilities

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

store of value

The agency responsible for regulating the money supply in the US is:

the Federal Reserve

Liquidity refers to:

the ease with which an asset is converted to the medium of exchange

Best illustrates the medium of exchange function of money:

you pay for your double latte using currency