Exam 32: Inflation and the Quantity Theory of Money

If money is neutral in the long run, why would the Fed want to increase the money supply? Explain carefully.

Reference: Ref 15-2 (Table: Multiple Deposit Expansion) For the multiple deposit expansion process described in this table, what is the required reserve ratio in this banking system?

Which of the following is NOT a function of the Federal Reserve?

Reference: Ref 15-3 (Table: Banking System) The banking system described in this table displays the positions held by four different banks. Which bank is liquid and solvent?

When the Federal Reserve conducts monetary policy, the Federal Reserve usually focuses on

Which of the following is the most liquid asset?

If the money multiplier is large, then action taken at the bottom of the money pyramid will have a relatively large effect on the entire pyramid.

The discount rate is the interest rate

(Table: National Banks) Assume that all banks follow the same required reserve ratio requirement. Also assume that the banks are listed in sequential order (thus the loans from The First National Bank become the deposits for the Second National Bank, and the loans from the Second National Bank become the deposits for the Third National Bank, and so on). Also, the banks' balance sheets must always be balanced. withdrawals, and thus each bank maintains 3 percent extra deposits as excess reserves over and above required reserves. What is the effective money multiplier now? c. What difficulty associated with monetary policy is illustrated by this question? B.

In what ways is the Federal Reserve System independent of the political process in the United States?

The major tools that the Fed uses to control the money supply include I. controlling the amount of government spending. II. discount rate lending. III. open market operations.

Banks retain only a small portion of their deposits on reserve in

When the Fed wants to change the money supply, it usually buys or sells money market mutual funds.

The money multiplier is equal to

An increase in money growth will cause output growth to increase in

Suppose you deposit $1,000 in your checking account. If the reserve ratio is 10 percent, how much of your deposit can the bank loan out?

Why did the Federal Reserve begin to pay interest on reserves held by banks?

To increase the money supply in the economy, the Fed would

All of the following are means of payment in the United States EXCEPT

The Federal Reserve has direct control over