Exam 11: The Monetary System

Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card.

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

If the money multiplier decreased from 20 to 12.5, then

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

The prices of goods at a grocery store are listed in dollars. Which function of money does this illustrate?

Today, bank runs are

The money supply decreases if the Fed

Imagine an economy in which: 1) pieces of paper called dollars are the only thing that buyers give to sellers when they buy goods and services, so it would be common to use, say, 50 dollars to buy a pair of shoes; 2) prices are posted in terms of yardsticks, so you might walk into a grocery store and see that, today, an apple is worth 2 yardsticks; and 3) yardsticks disintegrate overnight, so no yardstick has any value for more than 24 hours. In this economy,

When prisoners use cigarettes or some other good as money, cigarettes become

Because of the multiple tools at its disposal, the Fed can control the money supply very precisely.

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action

If the reserve ratio is 8 percent, then the money multiplier is

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

Which of the following is correct?

The Federal Reserve was created

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

Which of the following is included in M2 but not in M1?

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

The fractional reserve characteristic of the banking system allows banks to create money and also create wealth from bank deposits. Describe why this statement is or is not true.