Exam 16: Money and Banking

Suppose that the total checkable deposits in the entire banking system of an economy is $100 billion. The total required reserves are $10 billion. Further, banks do not hold any excess reserves, and individuals do not hold any cash in the economy. A. In this economy, if the Federal Reserve buys $10 million worth of government securities, then how much will the money supply increase by? Explain your answer. B. Will the change in money supply be greater or lesser than what you derived in part A if the banks hold excess reserves and individuals hold cash? Explain your answer.

Commodity money refers to money that:

Which of the following is included in the measure M1?

Under the current U.S monetary system, currency is distributed by the:

Assume that individuals hold no cash and banks hold no excess reserves. The Federal Reserve buys Treasury securities from a bank, and the reserve requirement on banks is 10 percent. As a result of the Federal Reserve's action, the money supply in the economy increases by $5,000. Therefore, the Federal Reserve must have bought _____ of securities from the bank.

Which of the following institutions is owned entirely by its members, who are also their customers?

If an individual moves money from savings account to retail money market mutual fund, then the value of M1 _____, and the value of M2:

Which of the following statements is true?

Which of the following is NOT included in the measure M2?

The maximum amount of money that can be created using $1 of excess reserves is known as the:

A purchase of Treasury securities held by the Federal Reserve will lead to the maximum possible increase in money supply if banks:

All else equal, the _____ the amount of excess reserves held by banks and the _____ the reserve requirement, the higher will be the amount of money created in the economy as a result of Federal Reserve buying Treasury securities.

Assume that individuals do not hold any cash and the banks do not hold any excess reserves. If the Federal Reserve buys $100 of government securities and the money supply increases by $10,000, then the reserve requirement on banks is _____ percent, and the money multiplier is:

Which of the following is not considered money?

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

All else equal, the _____ the amount of cash held by individuals and the _____ the amount of loans given out by commercial banks, the higher the amount of money created as a result of Federal Reserve buying Treasury securities.

All else equal, the _____ the value of Treasury securities purchased by the Federal Reserve and the _____ the excess reserves held by commercial banks, the lower will be the amount of money created.

Which of the following institutions insures the deposits in commercial banks, savings banks, and savings and loans institutions?

Suppose that a bank receives $100 in deposits and the maximum it can lend from that is $80. In this case, the reserve requirement for the bank is _____ percent.

Assume that individuals hold cash and the banks hold excess reserves. If the reserve requirement is 1 percent and the Federal Reserve buys $10 of Treasury securities from a bank, then money supply will _____ than $1,000.