Exam 9: The Nature and Creation of Money

The Federal Reserve buys $10,000 of government securities from commercial banks.If the required reserve ratio is 25%, what is the maximum amount of change in the nation's money supply? Assume that no banks keep excess reserves and no individuals or firms hold cash.

The Federal Reserve does all of the following except

The money supply is the total amount of checkable deposits in the economy.

Any item that serves as a medium of exchange is called

Suppose a bank has $50,000 in deposits and $6,000 in reserves.The required reserve ratio is 10%.Which of the following occurs if the required reserve ratio is increased to 12%?

The functions of money are

If the Fed buys U.S.government bonds from the public, it

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?

A primary function of a central bank is to

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) As a result of the open market sale, Jekyll Bank

Money is any item that

You spend $20 to buy a used textbook at the college bookstore.What function does money perform here?

Money that some authority, generally a government, has ordered to be accepted as a medium of exchange is called _______ money.

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

Which of the following items serve as a medium of exchange in the United States? I.$100 cash II.50 euros III.the balance in your checking account IV.a $1,000 corporate stock that you own

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

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

Use the following to answer questions Exhibit: Deposit Expansion Stages -(Exhibit: Deposit Expansion Stages) What is the value of $H (the total loans) ?

The quantity of reserves that banks must hold against deposits is called