Chapter 14
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.
