Macro Learning Curve 4
The Federal Reserve:
did not pay interest on reserves in the past but recently began to do so.
In a fractional-reserve banking system, the fraction of deposits that a bank keeps as reserves is called the: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices
reserve-deposit ratio.
According to the text, the gold standard was most commonly used throughout the world during the:
1800s
Assuming that banks hold no excess reserves, suppose that banks hold a reserve-deposit ratio of 25 percent. If people deposit all their currency in the banks and they hold zero currency, then $50 million of deposits would generate a total money supply of _____ million dollars.
200
From 2007 to 2014, the U.S. monetary base increased about _____ percent, while M1 increased about _____ percent.
400; 100
Suppose that a $100 purchase of government bonds by the U.S. Federal Reserve causes a $200 increase in the money supply in an economy in which banks hold 25 percent of deposits as reserves. What percentage of bank deposits is held as currency?
50 percent
Which are included in M1 but not included in M2?
All items in M1 are also included in M2.
_____ banks in the world operate under a 100-percent-reserve banking system.
Almost no
According to the text, which is the MOST likely reason that individuals began to hold paper money instead of gold?
People believed the government's promise that it would redeem government-issued paper bills for gold.
Which is an example of a fiat money?
U.S. dollar bills
Which is/are considered currency?
both coins and paper bills.
The presidents of the regional Federal Reserve banks are:
chosen by these banks' boards of directors.
In a 100-percent-reserve banking system, a customer withdrawal will:
decrease deposits.
Money is a perfect store of value when the economy is experiencing:
neither inflation nor deflation.
From 2007 to 2014, the U.S. monetary base increased about 400 percent but M1 increased by only about 100 percent. This occurred because banks wanted to:
hold more reserves during the financial crisis and economic downturn of this period.
An increase in the number of bank failures will MOST likely cause the currency-deposit ratio to:
increase
If a bank holds 10 percent of its deposits as reserves, then a deposit of $100 will cause the bank's reserves to:
increase by $10 and its loans to increase by $90.
As the economy recovered following the economic downturn of 2007-2008, some observers were concerned that banks would reduce their holdings of excess reserves by making loans. In response to this problem, the Federal Reserve decided to _____ the interest paid on reserves in order to _____ bank lending.
increase; discourage
Jose's Bank chooses to hold 100 percent of deposits as reserves. If a customer deposits $5,000 to his checking account, the bank's deposits will _____ $5,000, while its reserves will _____.
increase; increase $5,000
Money is NOT a(n):
input to production.
In the Yap Islands, the traditional medium of exchange was called fei, which was:
large stone wheels.
When money is used to buy or sell a good, it is used as a:
medium of exchange.
When a person knows that three one-dollar bills can buy a gallon of gasoline when the price of a gallon of gasoline is $3.00, then that person understands that money can serve as a:
unit of account.
