Exam 24: The Aggregate Demandaggregate Supply Model

Scenario 1: Fed Buys Bonds from Sheila Jones Consider a banking system in which the reserve requirement is 10%, banks try not to hold excess reserves, consumers and firms hold money only in the form of checking account balances, and all loan proceeds are spent. Suppose initially all banks in the system are loaned up. Now, suppose that the Fed buys a $100,000 bond from Sheila Jones, who banks at the Perez Bank, and that she deposits her check in her checking account at Perez Bank. -Refer to Scenario 1. As a result of Sheila's deposit, Perez Bank can increase its loans by

A bank that has no excess reserves

Scenario 1: Fed Buys Bonds from Sheila Jones Consider a banking system in which the reserve requirement is 10%, banks try not to hold excess reserves, consumers and firms hold money only in the form of checking account balances, and all loan proceeds are spent. Suppose initially all banks in the system are loaned up. Now, suppose that the Fed buys a $100,000 bond from Sheila Jones, who banks at the Perez Bank, and that she deposits her check in her checking account at Perez Bank. -Refer to Scenario 1. Which of the following happens when Sheila Jones deposits the proceeds from the sale of her bond to the Fed into her checking account at the Perez Bank?

When the Fed sells government bonds in the open market, the money supply will increase.

Explain the differences between the two money measures, M1 and M2. Why are checks, debit cards, and credit cards not considered to be money?

The Federal Reserve System is made up of twelve regional banks owned by

The Fed's most important and most frequently used tool of monetary policy is

In 2008, commercial banks' share of the U.S. credit market changed as a result of

Which of the following is true?

Currency is paper money and coin issued by the government.

If Naruz is in the car dealer's showroom looking at the sticker price on a 2013 car, that sticker price serves as a medium of exchange.

Which of the following is a market in which banks lend reserves to one another?

In the federal penitentiary at Lompoc, California, inmates used packages of mackerel to buy items such as haircuts at the prison barber shop and laundry services. What function do these packages of mackerel serve?

The Federal Reserve System was created by the

When banks hold more reserves than are required, such reserves are called

If the Fed buys U.S. government bonds from the public, it

If you withdraw currency from your savings account, you are

The rate of interest charged for reserves in the federal funds market is the

When the Fed sells government bonds it ____ reserves and ______ the money supply.

The Federal Reserve System was created in order to provide a constant money supply for the economy.