Exam 24: The Aggregate Demandaggregate Supply Model

Scenario 2: Fed sells bonds to Henry Hyde 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 sells a $50,000 bond to Henry Hyde, who pays for the bond by writing a check drawn against Jekyll Bank. -Refer to Scenario 2. Once the full impact of the Fed's open market sale works its way through the banking system, what is the maximum change on the money supply as a result of these two events?

Table 9-3 Balance Sheet of the Alpha-Beta Bank (All figures in $ million) -Refer to Table 9-3. What is the value of the bank's total reserves?

When a person makes price comparisons among products, money is being used as a(n)

Suppose a bank has $50,000 in deposits and $6,000 in reserves. The required reserve ratio is 10%. Which of the following occurs if the required reserve ratio is increased to 12%?

Any item that serves as a medium of exchange is called

Suppose you deposit $1,000 cash in your checking account at a bank. If the bank is loaned up and if the required reserve ratio is 10%, the maximum amount that the bank can lend now, following your deposit is

Which of the following is an example of a bank's reserves?

Decreasing the reserve requirement ratio is

Which of the following statements is true?

Suppose the Fed purchases $1,000 of government securities from the general public who then deposit the proceeds into their checking accounts in commercial banks. Which pair of the T-accounts below shows this transaction?

The banking system is able to make new loans equal to

Table 9-6: Deposit Expansion Stages In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number. -Refer to Table 9-6. What is the required reserve ratio?

The Federal Reserve System I. is the central bank for the United States. II. is a United States government owned bank. III. is a branch of the Treasury of the United States.

Debit cards are the electronic equivalent of a check, but neither debit cards nor checks are money.

The reserve-requirement ratio is the interest rate the Federal Reserve System charges banks for loans.

Money, like other assets such as durable goods, stocks, and bonds is a way of transferring purchasing power from the present to the future but money is different from these other assets because it is a medium of exchange while the other assets are not.

Money is essentially defined by

Table 9-1 -Refer to Table 9-1. The difference between M1 and M2 amounts to

A bank has $100,000 in checkable deposits and $30,000 in reserves. If the required reserve ratio is 10%, what is the amount of excess reserves?

The Federal Reserve influences the level of interest rates in the short run by changing the