Exam 16: The Monetary System

In December 1999 people feared that there might be computer problems at banks as the century changed. Consequently, people wanted to hold relatively more in currency and relatively less in deposits. In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands. These actions by the public

A decrease in the money supply might indicate that the Fed had

In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have

Which of the following is not included in M1?

Reserves increase if the Federal Reserve

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits. Its reserves amount to

When the Fed buys government bonds,

Money allows people to specialize in what they do best, thereby raising everyone's standard of living.

The measure of the money stock called M1 includes

Table 16-6. -Refer to Table 16-6. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

Commodity money cannot be used as a unit of account.

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

The "yardstick" people use to post prices and record debts is called

Values of Assets Asset Amount in \ Billions Small time deposits 780 Large time deposits 1,700 Demand deposits 450 Other checkable deposits 370 Savings deposits 4950 Traveler's checks 5 Money market mutual funds 740 Currency 880 Miscellaneous categories of M2 50 -Refer to Value of Assets. What is the value of M2 in billions of dollars?

The banking system currently has $50 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time sells $10 billion worth of bonds, then by how much does the money supply change?

Which of the following is correct?

In the special case of the 100 percent-reserve banking the money multiplier is

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Which of the following best illustrates the unit of account function of money?