Exam 8: Money, the Price Level, and Inflation

The sale of $1 billion of securities to a bank or some other business by the Fed is an example of

When real GDP increases, people demand

Money market mutual funds invest in

All the following statements about the Federal Reserve are true EXCEPT it__________.

Which of the following is NOT included in the M1 measure of money?

M1 is a measure of

Comparing M1 and M2 we know that

List the Fedʹs main policy tools and briefly explain each one.

Suppose that the nominal quantity of money is $200 billion and the value of nominal GDP is $1 trillion. It must be the case that

Suppose that nominal interest rates double. As a result, the quantity of money doubles as well.

An open market purchase of securities by the Fed

If actual reserves are 100 when deposits are 400, then definitely the desired reserve ratio is 0.25.)

When the nominal interest rate rises, the opportunity cost of holding money

In an economy, there is $200 million in currency held outside banks, $100 million in travelerʹs checks, $250 million in currency held inside the banks, $300 million in checking deposits, and $600 million in savings deposits. The value of M1 is .

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

A depository institution creates liquidity and pools risk.

Money is created by

When banks use specialized resources to monitor borrowers, they are

Currency held outside the banking system is included

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired reserve ratio is 20 percent. a) How much does the bank have in excess reserves? b) What can the bank do with its excess reserves? Name two options.