Exam 16: Money and Banking

Assume that individuals hold no cash and banks hold no excess reserves. The Federal Reserve buys $100 worth of Treasury securities from a bank, and the money multiplier is 5. In this case, the reserve requirement on banks is _____ percent, and the total money supply in the economy will increase by:

What is the difference between commodity money in which gold is the commodity and the gold standard?

Which of the following is included in the measure M1?

Suppose that a bank receives a $500 deposit and holds $25 of that as required reserves. In this case, the reserve requirement is _____ percent, and the excess reserves are:

If an individual moves money from a saving account to a checking account deposit, then the value of M1 _____, and the value of M2:

Which of the following is the most liquid form of money?

If the reserve requirement on banks is 10 percent, then the money multiplier for the economy is:

The difference between a savings account deposit and a certificate of deposit at a commercial bank is that:

Which of the following are not included in thrift institutions?

If an individual converts cash into a checking account deposit, then the value of M1 _____, and the value of M2:

Consider an economy where banks do not hold any excess reserves and individuals do not hold any currency. Suppose that the Federal Reserve buys $20 billion of Treasury securities. A. For each of these values of the reserve requirement (1 percent, 5 percent, 10 percent, and 20 percent), what is the money multiplier, and how much will the money supply increase? B. Does the value of the change in money supply increase or decrease with an increase in reserve requirement? Explain your answer.

All else equal, the _____ the amount of cash held by individuals and the _____ the reserve requirement, the lower will be the amount of money created as a result of the Federal Reserve purchasing government securities.

Suppose that the reserve requirement for banks is 5 percent. A bank receives a deposit of which $25 are required reserves. Therefore, the total deposit received by the bank is ______, and the excess reserves are:

Suppose that the reserve requirement for a bank is 10 percent. The bank receives a deposit, and the maximum it can lend from it is $81. We can conclude that the bank received a deposit of _____ and the required reserves are: