Exam 9: The Nature and Creation of Money

The Fed's narrowest measure of money supply is

The federal funds rate is the interest rate the Fed charges to banks when it lends reserves to them.

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

If the banking system has $2,000 in excess reserves, then it can expand deposits at most by $10,000 if the required reserve ratio is 10%.

Which of the following items serve as a unit of account? I.$100 cash II.checkable deposits III.an original Picasso painting IV.a $1,000 corporate bond that you own

Debit cards are

Use the following to answer questions Exhibit: Deposit Expansion Stages -(Exhibit: Deposit Expansion Stages) New loans made in Stage 1($C) Amount to

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

Rank the following items in terms of most liquid to least liquid.

Which of the following items serve as a store of value? I.cash in your pocket II.the balance in your checking account III.an original Picasso painting IV.a $1,000 corporate bond

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

Use the following to answer questions Exhibit: Deposit Expansion Stages -(Exhibit: Deposit Expansion Stages) What is the value of $A in stage 1?

A bank's reserves are

Gresham's Law is the tendency for low-quality money to drive high-quality money out of circulation.

The _____ rate is the interest rates charged when a bank lends reserves to another bank.

The deposit multiplier is the inverse of

In a system with 100% reserve requirement, banks cannot create loans.

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) Once the full impact of the Fed's open market purchase and Sheila's deposit worked its way through the banking system, what is the maximum change on the money supply as a result of these two events?

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

The Dodd-Frank Wall Street Reform Act was a response to the financial crisis of 2008.