Exam 16: The Monetary System

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. -Refer to Scenario 29-2. Suppose the Bank of Tazi purchased 50 million tazes of Tazian Treasury Bonds from the banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change?

Which of the following is an asset of a bank and a liability for its customers?

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. -Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is

People hold $400 million of bank deposits but no currency. Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of uncertainty, banks choose to hold $10 million more in reserves. The Fed takes no action. What happens to bank loans?

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?

Reserve requirements are regulations concerning

In an economy that relies on barter, trade requires a double-coincidence of wants.

Currently, bank runs are a major problem for the U.S. banking system and the Fed.

Which of the following best illustrates the concept of a store of value?

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at the Federal Open Market Committee meetings?

Which of the following entities actually executes open-market operations?

In the U.S., the average adult holds about $4,490 in

Table 29-3. An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. -Refer to Table 29-3. The bank's reserve ratio is

Table 29-9 Metropolis National Bank is currently holding 2% of its deposits as excess reserves. -Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assume that no banks in the economy want to hold excess reserves and that people only hold deposits and no currency. How much does the money supply ultimately increase when Metropolis National Bank lends out its excess reserves?

To increase the money supply, the Fed can

The interest rate the Fed charges on loans it makes to banks is called

If an economy used gold as money, its money would be

If the reserve ratio is 4 percent, then the money multiplier is