final exam ch 16

The M2 definition of the money supply includes

M1, savings​ accounts, small time​ deposits, and money markets.

Suppose the reserve requirement is 15​%. What is the effect on total checkable deposits in the economy if bank reserves increase by ​$40 ​billion?

$267 billion increase

biggest portion of M1

checkable account deposits

The U.S. dollar can best be described as

fiat money

The US is divided into how many Federal Reserve districts?

12

one of the board members is appointed to a how many year renewable term as the chairman?

4

Board of Governors consists of how many members appointed by the president

7

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.

true or false. 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.

In​ 2008, the required reserve ratio for a​ bank's first​ $9.3 million in checking account deposits was zero. It was 3 percent on deposits between​ $9.3 million and​ $43.9 million, and 10 percent on deposits above​ $43.9 million. In most​ cases, and for​ simplicity, we assume that the required reserve ratio is 10 percent on all deposits.​ Therefore, the simple deposit multiplier is 10. Is the​ real-world deposit multiplier greater​ than, less​ than, or equal to the simple deposit​ multiplier?

Less. The simple deposit multiplier is a model with assumptions that keep it higher than the​ real-world multiplier.

Which of the following is NOT a function of​ money?

acceptability

Which of the following is true with respect to ​hyperinflation?

all A. It can be hundreds even thousands of percentage points per year. B. It is caused by central banks increasing the money supply at a rate much greater than the growth rate of real GDP. C. In the presence of​ hyperinflation, firms and households avoid holding money.

Which of the following is true with respect to Irving​ Fisher's quantity​ equation, M x V = P x Y​?

all of the above. (M is M1, V is average number of times a dollar is spent on goods and services, and p is gdp deflator)

Which of the following is a monetary policy tool used by the Federal Reserve​ Bank?

all of these A. Buying​ $500 million worth of government​ securities, such as Treasury bills. B. Decreasing the rate at which banks can borrow money from the Federal Reserve. C. Increasing the reserve requirement from 10 percent to 12.5 percent.

An initial decrease in a​ bank's reserves will decrease checkable deposits

by an amount greater than the decrease in reserves.

The use of money

eliminates the double coincidence of wants, allows for greater specialization, and reduces the transaction costs of exchange

In addition to the Federal Reserve​ Bank, what other economic actors influence the money​ supply?

households, firms, and banks

Credit cards are

included in neither the M1 definition of the money supply nor in the M2 definition.

According to the quantity theory of money​, inflation results from which of the​ following?

the money supply grows faster than real GDP.