Exam 13: Money and the Banking System

According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper currency in circulation is counterfeit. Undetected counterfeit U.S. currency being held by the public both at home and abroad will impact the level of

Suppose George withdraws $60,000 from his bank. If the reserve ratio is 25 percent, then this transaction will lead to a decrease of ________ in checking account balances.

If the reserve ratio is 0.3 and a deposit of $1,000 is made to the bank, the bank can lend out $700.

Given the following information about AAA bank: Bank Deposits $200,000 Loans 100,000 Required Reserves 40,000 Excess Reserves 60,000 What is the reserve ratio?

When checks are exchanged between banks, the Fed oversees the banks to ensure the appropriate funds have been transferred. This is known as

Studies by economists have tended to show that countries with more independent central banks have

Assuming all excess reserves are loaned out, if the reserve ratio is 1 percent, the money multiplier will be equal to

Assuming all excess reserves are loaned out, if the reserve ratio is 3.33 percent, the money multiplier will be equal to

Assuming all excess reserves are loaned out, currency holdings by the public are zero, and a reserve ratio of 2 percent, an initial deposit of $500 will lead to a total increase in deposits of

As inflation rates increase, money becomes less useful as a

Table 13.1 -According to the information in Table 13.1, M2 is equal to

There are ________ members of the FOMC.

Fiat money refers to a monetary system in which gold backs up paper money.

There are ________ Federal Reserve Banks located in different parts of the United States.

Suppose a bank has $600,000 in deposits, a reserve ratio of 20 percent, and bank reserves of $240,000. This bank can make new loans in the amount of

According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper currency in circulation is counterfeit. As long as counterfeit U.S. currency remains undetected and in circulation, an increase in the U.S. inflation rate would essentially

Which one of the following statements is true?

Suppose a bank has $8 million in deposits and a reserve ratio of 20 percent. Its required reserves are

Assuming all excess reserves are loaned out, currency holdings by the public are zero, and a reserve ratio of 20 percent, an initial deposit of $850 will lead to total deposits of

Recall the Application about how the Fed kept the U.S. financial system in operation following the attacks of September 11, 2001, to answer the following question(s). To help prevent financial firms from defaulting on their debts, the Fed took several steps to provide additional funds to the financial system, including allowing banks to borrow more, increasing the difference between the credits and debits it extended while serving as a clearinghouse for checks, purchasing government securities, and providing dollars to foreign central banks. Together, these actions increased the credit extended by the Fed by over $90 billion. -According to this Application, following the attacks of September 11, 2001, the Fed effectively put an additional $20 billion into the banking system by increasing the difference between the credits and debits it extended while serving as a clearinghouse for checks. The difference between the credits and debits extended by the Federal Reserve is called the