Exam 16: The Monetary System

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Money is

Which of the following might explain why the United States has so much currency per person?

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Other things the same, if reserve requirements are increased, the reserve ratio

Today, bank runs are not a major problem for the U.S. banking system because

The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of

Given the following information, what are the values of M1 and M2? Small time deposits $2,200 billion Demand deposits and other checkable deposits $1,700 billion Savings deposits $2,600 billion Money market mutual funds $1,500 billion Traveler's checks $60 billion Large time deposits $1,500 billion Currency $350 billion Miscellaneous categories in M2 $75 billion

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,

Table 29-5. -Refer to Table 29-5. If the bank faces a reserve requirement of 8 percent, then the bank

According to the article "Why Gold?', silver may be used as money. One problem with using silver as money is that

The existence of money

Table 29-8 -Refer to Table 29-8. This bank's leverage ratio is

The federal funds rate is a long-term interest rate banks charge one another for loans.

Table 29-7. -Refer to Table 29-7. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

If the central bank in some country raised the reserve requirement, then the money multiplier for that country

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

Which list ranks assets from most to least liquid?

In a fractional-reserve banking system, a bank

Which of the following is included in both M1 and M2?