Exam 24: The Nature and Creation of Money

The non-bank public chooses among various financial assets in deciding in what form it wants to hold liquidity.It thereby increases or decreases I.the M1 measure of money supply. II.the reserves of commercial banks. III.the reserves that commercial banks are required to hold.

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.Which of the following happens when Henry Hyde pays for the bond by writing a check from his checking account at the Jekyll Bank?

The price of a new Nokia cell phone is $90.What is the function of money in this context?

A financial institution that accepts deposits, makes loans, and offers checking accounts is

A bank is "loaned up" when

Nita deposits a check for $750 drawn against Home Federal Bank into her account at Village Bank.Which pair of the T-accounts below shows this transaction on the respective bank's balance sheets?

Which of the following is an advantage of using money as a medium of exchange?

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

When a bank receives new deposits, it can make new loans up to the amount of

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

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 work its way through the banking system, what is the maximum change on the money supply as a result of these two events?

Which of the following is a consequence of deposit insurance?

Because commodity money is not uniform in quality, there is a tendency

Inflation reduces the ability of money to function as a

The required reserve ratio is the percentage of checkable deposits that must be held as reserves.

A bank that has no excess reserves

Currency in the United States today is

A primary function of a central bank is to

The Fed can increase the federal funds rate by

Which of the following describes the medium-of-exchange function of money?