Exam 9: The Nature and Creation of Money

Which of the following equations is correct?

What is the value of the deposit multiplier in a 100-percent reserve banking system?

Use the following to answer questions . Exhibit: Reserves, Loans, and Money -(Exhibit: Reserves, Loans, and Money) If the required reserve ratio is 10% and the market interest rate is 8%, what is Bolton Bank's opportunity cost of holding the excess reserves it is currently holding?

Use the following to answer questions . Exhibit: Fed Buys Bonds 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. -(Exhibit: Fed Buys Bonds) 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?

Use the following to answer questions . Exhibit: Reserves, Loans, and Money -(Exhibit: Reserves, Loans, and Money) The required reserve ratio is 10%. What is the amount of Bolton Bank's excess reserves?

The three main monetary policy instruments are

The Fed conducts an open market purchase of $10 million in government securities. If the reserve ratio is 20%, what is the maximum change in the money supply? Assume banks hold no excess reserves and there is no currency withdrawal from the banking system.

The price of an iPhone 7 is $650. What is the function of money in this context?

Use the following to answer questions . Exhibit: Fed Sells Bonds 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. -(Exhibit: Fed Sells Bonds) 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?

If you need cash you can go to the bank and withdraw some of your savings. If you have some U.S. treasury bonds, you can also "cash" them in. Why, then, does the definition of money include savings accounts but not government bonds as part of the M2 money supply?

Use the following to answer questions . Exhibit: Fed Sells Bonds 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. -(Exhibit: Fed Sells Bonds) To collect the $50,000 payment made by Henry, the Fed

A financial intermediary is an institution that collects funds from lenders and distributes these funds to borrowers.

The Federal Reserve System was created by the

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

Which of the following is true?

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

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

Use the following to answer questions. Exhibit: Acme Bank: Partial Balance Sheet -(Exhibit: Acme Bank: Partial Balance Sheet) If Acme Bank has no excess reserves, the required reserve ratio is

Use the following to answer questions . Exhibit: Components of the Money System -(Exhibit: Components of the Money System) The money supply measured by M2 is

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