Lecture 3 - Clicker Questions
. If the currency-deposit ratio is 0.7 and the reserve-deposit ratio is 0.2, what is the money multiplier?
1.89
The Fed sees that commercial banks hold adequate reserves by:
paying the banks interest on their reserves.
Which is NOT a role money plays in the economy?
Factor of production
What enables money creation in addition to that directly created by the central bank?
Fractional-reserve banking
. The Fed's strategy of buying long-term, riskier assets in response to the Great Recession is known as:
quantitative easing.
Which is NOT a variable determining the supply of money?
The marginal propensity to save
Which statement is TRUE?
The system of fractional-reserve banking creates money but not wealth
A bank's total assets relative to the bank owners' equity is the:
leverage ratio.
The use of borrowed funds to make investments is called:
leveraging.
An example of fiat money is:
paper bills.