Chapter 8 Econ 102
Depository institutions do all the following except?
create required reserve ratios
The monetary base is the sum of?
currency and reserves of depository institutions
In figure above, if the interest rate is 4%, there is a $0.1 trillion excess of?
demand for money and bond prices will fall
When price levels rise, the quantity of nominal money demanded will ... and the quantity of real money demanded will ...?
increase, stay the same
Aside from being a means of payment, the other functions of money are?
medium of exchange, unit of account, and store value
Controlling the quantity of money and interest rates to influence aggregate economic activity is called?
monetary policy
Credit cards are?
not part of money because they represent a loan of money to the user
The table above gives the quantity of money demand schedules. Suppose that the interest rate is equal to 3 percent. The effect of this interest rate in the money market is that?
people sell bonds and the interes rate rises
In the above figure, suppose the economy is at point a. If there is an increase in real GDP, there is a movement to point such as?
point D
According to the quantity theory of money, in the long run, changes in the price level are the result of changes in the?
quantity of money
The fed buys $100 million of government securities from Bank A. What is the effect on Bank A's balance sheet?
securities decrease by $100 million and reserves increase by $100 million
In the figure above, a decrease in the monetary base would create a change such as a?
shift from the supply of money curve MS1, to the supply of money curve MS0
The larger the public's currency drain from the banking system, the?
smaller is the money multiplier
In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in the use of credit cards?
the demand for money curve would shift leftward to MD0
The opportunity cost of holding money refers to?
the interest that could have been earned if the money balances had been changed into an interest-bearing asset
Frank spends saturday afternoon at the dodge dealership looking at new trucks. The model that he is interested in has a sticker price of $29000. The fact that the price is quoted in dollars is an example of money used as a?
unit of account
Suppose bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20%. How many deposits can Bank A create?
zero, because bank A has no excess reserves
If velocity is 6 and the quantity of money is $2trillion, what is nominal GDP?
$12 trillion
The above table gives the initial balance sheet for mini bank. If the bank's desired reserve ratio is 10%, how much does this bank have in excess reserves?
$60
According to the table above, the value of M1 is ... and the value of M2 is...
$910 billion, $2490 billion
the above table presents the balance sheet of the TBK commercial bank. What is the bank's actual reserve ratio?
20%
When the monetary base increases by $2billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals?
5
In the short run, when the Fed decreases the quantity of money?
Bond prices fall and the interest rate rises
The sale of $1billion of securities to a bank or some other business by the Fed is an example of?
an open market operation
When a bank has excess reserves?
both answers A and B are correct
