Exam 19: A Macroeconomic Theory of the Open Economy

According to portfolio theories of money demand, increases in wealth the demand for money, and increases in the expected inflation rate the demand for money.

High-powered money is another name for:

As the U.S. economy approached the millennium, January 1, 2000, many people cautiously began to hold larger than normal quantities of currency as protection against a possible disruption of banking services that could result from computer glitches. a. How did this greater preference for currency affect the money supply? b. What was the impact on output? c. How could the Federal Reserve offset such an increase in currency preferences?

If currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the money supply equals:

The difference between banks and other financial intermediaries is that only banks have the legal authority to:

If many banks fail, this is likely to:

The amount of capital that banks are required to hold depends on the:

The money supply will decrease if the:

If you hear in the news that the Federal Reserve conducted open market purchases, then you should expect to increase.

Assume that the monetary base (B) is $100 billion, the reserve-deposit ratio (rr) is 0.1, and the currency-deposit ratio (cr) is 0.1. a. What is the money supply? b. If rr changes to 0.2, but cr is 0.1 and B is unchanged, what is the money supply? c. If rr is 0.1 and cr is 0.2, but B is unchanged, what is the money supply?

If the monetary base equals $400 billion and the money multiplier equals 2, then the money supply equals:

Liabilities of banks include:

The use of borrowed funds to supplement existing funds for purposes of investment is called:

If currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the monetary base equals:

When the Fed decreases reserve requirements, it:

If the Baumol-Tobin model of money demand is correct, then as the interest rate increases:

A bank balance sheet consists of only the following items: Deposits \ 1,000 Reserves \ 100 Securities \ 400 Debt \ 500 Loans \ 2,000 What is the value of bank capital?

The Federal Reserve has three tools to control the money supply: open-market operations, the discount rate, and reserve requirements. a. How should each instrument be changed if the Fed wishes to decrease the money supply? b. Will the change affect the monetary base and/or the money multiplier?

The value of banks owners' equity is called bank:

To increase the money multiplier, the Fed can: