Exam 9: The Nature and Creation of Money

Suppose the required reserve ratio is 10%.If a bank has total reserves of $80,000 and checkable deposits of $550,000, what is the amount of the bank's excess reserves?

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?

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

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.

Which of the following would lead to a change in the money measure, M1?

Money that has value apart from its use as money is called

Which of the following illustrates the store-of-value function of money?

Use the following to answer questions Exhibit: Balance Sheet of the Alpha-Beta Bank -(Exhibit: Balance Sheet of the Alpha-Beta Bank) What is the value of the bank's total reserves?

Use the following to answer questions Exhibit: Components of the Money System -(Exhibit: Components of the Money System) The difference between M1 and M2 amounts to

Gresham's Law

When you buy a ticket to the rodeo, you are using money as a

Why might monetary policy authorities be concerned when non-bank financial intermediaries account for a growing share of an economy's financial assets?

Use the following to answer questions Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 1, if savings deposits had been $200 billion instead of $150 billion, M1 would have been

Currency in the United States today is

Money is essentially defined by

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

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.

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

When you discover money in your coat that you placed there last winter, you unexpectedly find you were using money as a(n)