Ch. 16 Econ

The Monetary Policy of Jaune is controlled by the country's central bank known as the Bank of Jaune. The local unit of currency is the Jaunian dollar. Aggregate banking statistics show that collectively the banks of Jaune hold $220 million of required reserves, $55 million of excess reserves, have issued $5,500 million of deposits, and hold $440 million of Jaunian Treasury bonds. Jaunians prefer to use only demand deposits and so all money is on deposit at the bank. 10. Assuming the only other thing Jaunian banks have on their balance sheets is loans, what is the value of existing loans made by Jaunian banks? A. $4,785 million B. $5,225 million C. $5,435 million D. $4,685 million

A. $4,785 million

When the Fed decreases the discount rate, banks will A. borrow more from the Fed and lend more to the public. The money supply increases. B. borrow more from the Fed and lend less to the public. The money supply decreases. C. borrow less from the Fed and lend more to the public. The money supply increases. D. borrow less from the Fed and lend less to the public. The money supply decreases.

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

The set of items that serve as media of exchange includes A. demand deposits. B. short-term bonds. C. credit cards. D. savings accounts.

A. demand deposits.

Which of the following will help to prevent bank runs? A. A 0% reserve requirement B. 100% reserve banking C. Lack of government insurance of deposits D. Fractional reserve banking

B. 100% reserve banking

Hideo and Hannah decide to go on a vacation. As a result, they withdraw $5,000 from their savings account to purchase $5,000 worth of traveler's checks. As a result of these changes, A. M1 increases by $5,000 and M2 decreases by $5,000. B. M1 increases by $5,000 and M2 stays the same. C. M1 and M2 stay the same. D. M1 decreases by $5,000 and M2 increases by $5,000.

B. M1 increases by $5,000 and M2 stays the same.

The leverage ratio is calculated as A. assets minus liabilities. B. assets divided by bank capital. C. the reciprocal of the required reserve ratio. D. the required reserve ratio multiplied by bank capital.

B. assets divided by bank capital.

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply? A. $50 B. $100 C. $150 D. $200

C. $150

The Monetary Policy of Jaune is controlled by the country's central bank known as the Bank of Jaune. The local unit of currency is the Jaunian dollar. Aggregate banking statistics show that collectively the banks of Jaune hold $220 million of required reserves, $55 million of excess reserves, have issued $5,500 million of deposits, and hold $440 million of Jaunian Treasury bonds. Jaunians prefer to use only demand deposits and so all money is on deposit at the bank. 33. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Jaunian Banks? A. 5 percent, 8 percent B. 4 percent, 8 percent C. 4 percent, 5 percent D. 5 percent, 4 percent

C. 4 percent, 5 percent

Which of the following both increase the money supply? A. An increase in the discount rate and an increase in the interest rate on reserves B. An increase in the discount rate and a decrease in the interest rate on reserves C. A decrease in the discount rate and an increase in the interest rate on reserves D. A decrease in the discount rate and a decrease in the interest rate on reserves

D. A decrease in the discount rate and a decrease in the interest rate on reserves

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold A. fewer reserves, so the reserve ratio will fall. B. fewer reserves, so the reserve ratio will rise. C. more reserves, so the reserve ratio will fall. D. more reserves, so the reserve ratio will rise.

D. more reserves, so the reserve ratio will rise.

When conducting an open-market sale, the Fed A. buys government bonds, and in so doing increases the money supply. B. buys government bonds, and in so doing decreases the money supply. C. sells government bonds, and in so doing increases the money supply. D. sells government bonds, and in so doing decreases the money supply.

D. sells government bonds, and in so doing decreases the money supply.

Measures of Money Stock - what is in M1?

Demand deposits, traveler's checks, other checkable deposits, currency

Measures of Money Stock - what is in M2?

Everything in M1, savings deposits, small time deposits, money market mutual funds, a few minor categories

Money multiplier equation

Reciprocal of the reserve ratio = 1/R