Exam 16: The Monetary System

Scenario 29-1. The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits. -Refer to Scenario 29-1 . Suppose the Central Bank of Namdia purchases 25 million dias of Namdian Treasury Bonds from banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?

One plausible explanation for the large amount of U.S. currency outstanding is that many dollars are held abroad.

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M1 in billions of dollars?

Which of the following is a function of money?

The measure of the money stock called M1 includes

If the public decides to hold more currency and fewer deposits in banks, bank reserves

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

Under a fractional-reserve banking system, banks

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

In an economy that relies upon barter,

A bank's assets equal its liabilities under

Trace the effects on the money supply when the Fed decreases the discount rate.

An increase in the money supply might indicate that the Fed had

In the months of November and December, people in the United States hold a larger part of their money in the form of currency because they intend to shop and travel for the holidays. As a result, other things the same, the money supply increases.

Prisoners sometimes determine a single good to be used as money. This good becomes

Consider four survivors on an island. Which of the following pairs of survivors has a double-coincidence of wants?

Which of the following is correct?

Savings deposits are included in

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by