Exam 29: The Monetary System

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?

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.

Economists use the term "money" to refer to

Table 29-4. -Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

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

Which of the following is not correct?

The money supply increases when the Fed

If the Federal Open Market Committee decides to decrease the money supply, it will

The Federal Reserve

The is the interest rate at which banks make overnight loans to other banks.

The reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency. When the Fed sells $20 million worth of bonds to the public, bank reserves

Money is

When the Fed buys government bonds,

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a . The laptop's price is posted as $500. The $500 price illustrates money's function as a . You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______.

U.S. dollars are an example of commodity money and hides used to make trades are an example of fiat money.

The leverage ratio is calculated as

Currency includes

The interest rate charged by the Fed to member banks is called the .

In a system of 100-percent-reserve banking,

Credit cards