Exam 16: Money and Banking

Assume that individuals hold no cash and banks hold no excess reserves. The Federal Reserve buys $500 worth of government securities from a bank, and the reserve requirement on banks is 5 percent. In this case, the money multiplier is _____, and the overall increase in money supply because of Federal Reserve's action will be:

Assume that individuals hold cash and banks hold some excess reserves. If the reserve requirement is 10 percent and the Federal Reserve buys $100 of Treasury securities from a bank, then money supply will:

Fiat money refers to a system where money:

All else equal, the _____ the value of Treasury securities purchased by the Federal Reserve and the _____ the reserve requirement, the higher will be the amount of money created.

Which of the following will lead to an increase in the value of the money multiplier?

_____ are not considered to be ideal characteristics of money.

Suppose that the reserve requirement on banks is 10 percent. If the Federal Reserve buys $100 of Treasury securities and the money supply increases by $1,000, then we can conclude that:

Financial institutions whose primary focus is to provide mortgage loans are known as:

Which of the following will NOT lead to an increase in the amount of money created as a result of the Federal Reserve buying a given amount of securities?

Suppose that a bank receives $100 in deposits and the reserve requirement is 10 percent. In this case, the maximum amount that this bank can lend out from the deposit is:

A repeal of which of the following acts allowed commercial banks to engage in the buying and selling of stocks and insurance?

The U.S Federal Reserve produces two measures of money - M1 and M2. Which one of these measures is more liquid? Which one of these measures is more stable? Explain your answer.

Which of the following types of loans are the primary focus of savings and loan associations (S&Ls)?

If an individual converts part of his or her cash into a checking account deposit and another part into a saving account deposit, then the value of M1 _____, and the value of M2:

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

In a fractional banking system, banks:

Money that has value apart from its use as money is known as ______, while money that has value only because the government says it is valuable is known as:

The percentage of deposits that banks cannot lend out is known as:

Assume that individuals hold no cash and banks hold no excess reserves. If the reserve requirement on banks is 10 percent, then a $1 increase in excess reserves will lead to a _____ increase in the money supply.

By providing a standard measure for prices and economic comparisons, money serves which of the following functions?