Exam 9: The Nature and Creation of Money

Use the following to answer questions Exhibit: Money in the Economy -(Exhibit: Money in the Economy) In Year 2, the supply of money measured by M1 was

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

Which of the following is true regarding the interest rate earned on the reserves that bank's keep at the Fed?

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 maximum amount of new loans that Bolton bank can create and by how much can Bolton initially increase the money supply, assuming that newly created deposits are transferred to another bank?

The unit-of-account function of money means that money is used

When a person makes price comparisons among products, money is being used as a(n)

Suppose the required reserve ratio is 10%.Mr.Normal uses his ATM card to withdraw $1,000 from this checking account in California National Bank.This action has

Use the following to answer questions Exhibit: Deposit Expansion Stages -(Exhibit: Deposit Expansion Stages) What is the required reserve ratio?

Use the following to answer questions Exhibit: Acme Bank: Partial Balance Sheet -(Exhibit: Acme Bank: Partial Balance Sheet) If Acme Bank has no excess reserves, the required reserve ratio is

Credit cards are money since they facilitate the purchase of goods and services.

A bank has $100,000 in checkable deposits and $30,000 in reserves.If the required reserve ratio is 10%, what is the amount of required reserves?

Excess reserves plus total reserves equal required reserves.

When the Fed sells government bonds in the open market, the money supply will increase.

If the reserve ratio is 10%, and banks do not hold excess reserves, when the Fed purchases $10 million of government bonds, bank reserves

When the Fed purchases government bonds it _____ reserves and ____ the money supply.

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

The Federal Reserve System was created by the

The Federal Reserve System is made up of twelve regional banks owned by

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. -A financial intermediary is an institution that collects funds from lenders and distributes these funds to borrowers.

Money, like other assets such as durable goods, stocks, and bonds is a way of transferring purchasing power from the present to the future but money is different from these other assets because it is a medium of exchange while the other assets are not.