Exam 13: Money and the Banking System

Assuming all excess reserves are loaned out, if the reserve ratio is 40 percent, the money multiplier will be equal to

Economists use M2 to measure the amount of money that is regularly used in transactions.

Along with currency not in banks and deposits in checking accounts, what is another component of the M1 measure of money?

In order for a barter transaction to be successful, there must be a

If people never withdrew money, how much money could the banking system create given a new amount of deposits, assuming that excess reserves were zero?

Assuming all excess reserves are loaned out, currency holdings by the public are zero, and a reserve ratio of 25 percent, an initial deposit of $3,000 will lead to a total increase in deposits of

According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper currency in circulation is counterfeit. The U.S. government is continually adding security features to its paper currency to help make counterfeit money easier to detect. If counterfeit currency remained undetected, a vast increase in the supply of counterfeit U.S. currency would

Why is the money multiplier in the United States smaller than the inverse of the required reserve ratio?

Recall the Application about the Fed's response to the collapse of the investment house Bear Stearns as well as its handling of the 2008 financial crisis with respect to other financial institutions to answer the following question(s). -Recall the Application. In response to the financial crisis, the Fed implemented a new policy in which it began to pay interest on deposits held at the Fed. This move would ________ deposits held at the Fed and ________ the Fed's ability to make loans.

Suppose after the semester ends, you take a trip to a tropical island. Upon arriving at the island, you make a stop at one of the markets and notice that everyone is carrying around jars full of little turtles. You also notice the person in line in front of you just paid for a bottle of rum with 6 turtles. Someone else just bought a straw hat for two turtles. Thinking back to your economics class (as painful as that may be), you would conclude that

In order for money to be an effective medium of exchange, it is important to have it serve as a unit of account.

The Federal Reserve is ________ the U.S. Treasury.

In the United States today, the government will exchange gold or silver for paper money.

The fraction of deposits that banks are required by law to hold and not lend out are called its

The money multiplier tends to be greater when

When money is accepted as payment for a good or service, it is being used as a

Suppose a bank has $300,000 in deposits, a reserve ratio of 5 percent, and bank reserves of $45,000. This bank can make new loans in the amount of

The group responsible for deciding on monetary policy is the

The purpose of having the members of the Board of Governors of the Federal Reserve serve fourteen-year terms is to

Money solves the dilemma of a double coincidence of wants by serving as a