Exam 18: Money and the Monetary System

How can a new deposit of $10,000 at one bank create other new deposits at other banks? Suppose the desired reserve ratio is 10 percent and people keep no currency outside of the banks. What will be the new amount of deposits in the second and third rounds?

The money multiplier is used to determine how much the

Banks create money by

If currency outside of banks is $800 billion; traveler's checks are $10 billion; checkable deposits owned by individuals and businesses are $700 billion; savings deposits are $4,000 billion; small time deposits are $1,000 billion; and money market funds and other deposits are $800 billion, then M1 equals ________ billion.

When the Fed buys a government security, what happens to the monetary base and the quantity of money? Which changes by more or do both change by the same amount?

The Federal Open Market Committee consists of

If the desired reserve ratio is 7 percent and a bank has $10,000 of deposits, then its desired reserves are

Keeping $20 in currency to be able to buy gasoline, money is performing which function?

M1 is composed of

The Fed buys $20,000 of government securities. The desired reserve ratio is 5 percent and the currency drain ratio is zero. What will be the change in the quantity of money?

"Banks hold about 50 percent of their assets as reserves." Is the previous statement correct or not?

"If the currency drain ratio increases, the monetary base decreases." Explain whether the previous statement is correct or incorrect.

Suppose the currency drain ratio is 25 percent and the desired reserve ratio is 20 percent. The money multiplier equals

Which of the following is money?

In order for any given commodity to be considered money, it has to

The Board of Governors of the Federal Reserve System has

When you use currency to buy lunch, money is performing which function?

Which of the following is NOT a function of money? I. unit of account Ii. store of value Iii. unit of debt

A bank has checking deposits of $400, saving deposits of $900, time deposits of $900, loans of $950, government securities of $900, outstanding credit card balances of $400, currency in its vault of $40, and deposits in its reserve account at the Fed of $40. a. What is the amount of this bank's deposits that are in M1? b. What is the amount of this bank's deposits that are in M2? c. What is the amount of this bank's reserves?

When a commercial bank receives a deposit, it must keep part of the deposit as cash reserves to satisfy its