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. To collect the $50,000 payment made by Henry, the Fed

Excess reserves plus total reserves equal required reserves.

If the Fed raises its target for the federal fund rate, this indicates

Which of the following describes the store of value function of money?

Which of the following is not a function of the Federal Reserve System?

Commodity money is paper currency that may be redeemed for a specific commodity at a specified rate on the currency.

The largest component of M1 is

When you buy a ticket to the rodeo, you are using money as a

Which of the following are primary functions of a central bank? I. act as a regulator of banks II. issue government bonds III. set monetary policy IV. regulate dividend payments by corporations

Gresham's Law

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

Table 9-3 Balance Sheet of the Alpha-Beta Bank (All figures in $ million) -Refer to Table 9-3. If the required reserve ratio is 10%, what is the maximum amount of new loans that Alpha-Beta can create?

Why might monetary policy authorities be concerned when non-bank financial intermediaries account for a growing share of an economy's financial assets?

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. New loans made in Stage 1($C) amount to

The ease with which an asset can be converted to money is its

A system in which banks hold reserves whose value is less than the sum of claims on those reserves is called

In a system with 100% reserve requirement, banks cannot create loans.

Money that has value apart from its use as money is called

Which of the following is part of M1? I. currency in a bank's vault II. cash in your wallet III. checkable deposits IV. traveler's checks

Suppose the Fed sells $1,000 of government securities to Commercial Banks. Which pair of the T-accounts below shows this transaction?