Exam 12: Money Creation and the Federal Reserve

Which of these is (are) true? I. Tighter lending standards tend to increase the money multiplier, making it easier for the Fed to use its tools effectively. II) If foreigners become less confident in the ability of the U.S. dollar to hold its value, the actual money multiplier will rise. III) If there is a general rise in fear of the financial system, the potential money multiplier will fall.

A bank has $50,000 in checking account deposits and loans of $49,000. Of the $49,000 loaned out, $43,000 remains in the checking accounts of the loan recipients. The bank has $50,000 cash on hand, and the reserve requirement is 25%. The amount of its required reserves equals:

Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's excess reserves?

In order for the Federal Reserve to raise interest rates, it needs to:

There are two ways for money to be initially deposited into the banking system. They include:

Assume the reserve requirement is 25% and the Federal Open Market Committee buys $4 million of U.S. government bonds from the public. As a result of this transaction, the supply of money is:

Which list represents monetary policy actions that are consistent with one another?

Open market operations consist of buying and selling government securities on the open market.

Today, the discount rate is generally lower than the federal funds rate.

If the reserve requirement is 25%, then a $500 increase in deposits means that the money supply:

The federal funds rate is the interest rate that banks charge other banks for _____ loans.

When the Federal Reserve prints money, what does it do with it?

The Federal Reserve consists of 12 regional banks overseen by the Board of Governors.

A bank has $50,000 in deposits from its checking account customers and loans of $49,000. Of the $49,000 loaned out, $43,000 had remained in the checking accounts of the loan recipients but it now has been converted to cash by the loan recipients. The bank had $50,000 cash on hand prior to the remaining loan proceeds being converted to cash, and the reserve requirement is 25%. The reserve ratio for this bank after the remaining loan proceeds are converted to cash is _____, and _____ meeting its reserve requirement.

Demand deposits are savings accounts that were offered when customers started to demand them.

Ibrahim deposits $2,000 cash into his checking account. If the reserve requirement is 15%, his bank's excess reserves change by $300.

The U.S. economy is currently experiencing high unemployment and low inflation. To lessen the unemployment problem, the Federal Reserve could:

An individual bank can, at most, lend out all of its:

Which of these are functions performed by the Federal Reserve Banks and their branches? I. regulating and supervising member banks II) distributing coins and currency III) setting interest rates paid by homeowners

The fractional reserve banking system: