Hw 4
In defining money as M1, economists exclude time deposits because
they are not directly or immediately a medium of exchange.
. Lowerin the reserve ratio
turns required reserves into excess reserves.
What are mortgage backed securities?
bonds backed by mortgage payments
Banks create money when they
buy government bonds from households.
Checkable deposits are
included in M1
A fractional reserve banking system
is susceptible to bank "panics" or "runs."
Suppose the reserve requirement is 20 percent. If a bank has checkable deposits of $4 million and actual reserves of $1 million, it can safely lend out
$200,000.
Refer to the table. Money supply M1 for this economy is
130
The paper money used in the United States is
Federal Reserve Notes
. In the U.S. economy, the money supply is controlled by the
Federal Reserve System.
monetary policy
Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.
"Near monies" are included in
M2 only
The functions of money are to serve as a
Unit of account, store of value, and medium of exchange
The Financial Crisis of 2007-2008 started in which sector of the economy?
real estate and housing sector
What "backs" the money supply of the United States?
the U.S. government's ability to keep the value of money relatively stable
Assume the economy faces high unemployment but stable prices. Which combination of government
the purchase of government securities in the open market and an increase in government spending
Ficial Policy
the use of government spending and taxation to influence the economy.