HW #10
The required reserves of a bank equal its ________ the required reserve ratio.
deposits multiplied by
Suppose you withdraw $500 from your checking account deposit and bury it in a jar in your back yard. If the required reserve ratio is 10 percent, checking account deposits in the banking system as a whole could drop up to a maximum of
$5,000
If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase
False
The Fed has complete control over the money supply
False
If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________.
increase; not change
Credit card balances are
not part of the money supply
Dollar bills in the modern economy serve as money because
people have confidence that others will accept them as money
When a financial asset is first sold, the sale takes place in the ________ market, and subsequent sales take place in the ________ market.
primary; secondary
The process of bundling loans together and buying and selling these bundles in a secondary financial market is called
securitization
If the Federal Open Market Committee wants to decrease the money supply through open market operations it will
sell U.S. Treasury Securities
Which of the following tools of monetary policy is used least often?
setting the required reserve ratio
The Federal Reserve was established in 1913 to
stop bank panics by acting as a lender of last resort
In economics, money is defined as
any asset people generally accept in exchange for goods and services
A bank's largest liability is its
deposits of its customers
Among potential stores of value, money
has the advantage of being the most liquid asset
Most U.S. currency held outside the U.S. banking system is held by foreigners
True
Open market operations refer to the purchase or sale of ________ to control the money supply
U.S. Treasury securities by the Federal Reserve
In an economy with money, as opposed to barter, people are more likely to specialize in the production of goods and services
True
A central bank can help stop a bank panic by
acting as a lender of last resort