Exam 8: Money, the Price Level, and Inflation

-In the above figure, if the interest rate is 4 percent, people

The quantity theory of money asserts that inflation is the result of growth in

-Liquidity is the

When a bank has excess reserves

Describe how actual reserves are calculated and explain the difference between desired reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

-The above table gives the initial balance sheet for Mega Bank. Barney comes into the bank and deposits $50 of currency into his checking account. The desired reserve ratio is 3 percent. After Barney's deposit, but before any other actions occur, MegaBank will have excess reserves of

As a "central bank," which of the following is TRUE regarding the Fed? I.The Fed is a public authority that regulates the nation's banks. II.The Fed is not allowed to provide services to commercial banks like Citibank. III.The Fed is required to provide banking services to private citizens.

The Federal Open Market Committee of the Federal Reserve System is responsible for

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

Money market mutual funds

Commercial banks do NOT

In an economy, there is $200 million in currency held outside banks, $100 million in traveler's checks, $250 million in currency held inside the banks, $300 million in checking deposits, and $600 million in savings deposits. The value of M1 is ________.

Which part of the Federal Reserve System meets every 6 weeks to determine the nation's monetary policy?

The main policy-making organ of the Federal Reserve System is the

The opportunity cost of holding money refers to

M2 ________.

Suppose that the money multiplier is 4. If the monetary base decreases by $2 million, the quantity of money will

Credit cards are not part of the nation's money supply.

-In the figure above, an increase in the monetary base would create a change such as a

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?