Exam 21: The Monetary System

During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

The banking system currently has $200 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 4 percent. If the Fed raises the reserve requirement to 10 percent and at the same time buys $50 billion worth of bonds, then by how much does the money supply change?

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it

Traveler's checks are included in

Reserves decrease if the Federal Reserve

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

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

Which of the following institutions is a central bank?

When the Soviet Union began breaking up in the late 1980s, cigarettes began replacing the ruble as the medium of exchange even though the ruble was legal tender. The cigarettes provide an example of commodity money.

M1 includes

The federal funds rate is the interest rate that

Which of the following is correct?

Which of the following defer payments?

One of the features of money is its store of value. However, most people do not hold their wealth as currency. Given that currency is the most liquid type of asset, why don't people hold all their wealth as currency?

In Ugoland, the money supply is $8 million and reserves are $1 million. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

Which list ranks assets from most to least liquid?

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

The discount rate is

A bank has a 20 percent reserve requirement, $8,000 in loans, and has loaned out all it can given the reserve requirement.