Exam 14: Money, banks, and the Federal Reserve System

Commodity money

A fractional reserve banking system is one in which banks hold less than 100 percent of ________ in reserves.

Hyperinflation can be caused by

Which of the following is not a consequence of the Fed changing the reserve requirement?

In response to the destructive bank panics of the Great Depression,future bank panics are designed to be prevented by

Economies cannot function without money.

Article Summary In what is being called a "bail-in," the finance ministers of the 17-nation Eurozone agreed to step in to assist the banking system in the nation of Cyprus. With this arrangement, the banks receive an infusion of capital, but depositors are being changed a special bank levy of up to 10% on deposit accounts. Like in the United States, Cyprus does have deposit insurance which guarantees deposits up to a certain level, but the size of the debt owed by the Cypriot banks was so large that agreeing to the special bank levy and ignoring the deposit insurance seemed necessary to get support from the European Union. Some analysts have also stated that the levy may have been needed to prevent bank runs on foreign-owned accounts, which have been estimated to make up one-third of the total deposits in Cypriot banks. Source: Megan McArdle, "After Cyprus Bank Bailout, Depositors Race to Withdraw Their Cash. Is the Rest of Europe Next?" Daily Beast, March 17, 2013. -Refer to the Article Summary.In 2013,the European Union agreed to essentially bail out the banks in the nation of Cyprus,but in doing so also included what is being called a special bank levy which was changed to bank depositors.This levy may have been needed to prevent bank runs,which are situations in which

What is the principle monetary policy tool used by the Fed.Why?

Which of the following functions of money would be violated if inflation were high?

The quantity theory of money was derived from the quantity equation by asserting that

Which of the following is not counted in M1?

Describe the structure of the Fed's Open Market Committee (FOMC).What is this committee's primary responsibility?

Banks can continue to make loans until their

For the purchasing power of money to increase,the price level has to fall.

If households in the economy decide to take money out of checking account deposits and put this money into savings accounts,this will initially

During the German hyperinflation of the 1920s,the large increases in the money supply were generated by the German government

In the United States,each bank panic in the late nineteenth and early twentieth centuries was accompanied by

The Federal Open Market Committee consists of

A central bank like the Federal Reserve in the United States can help banks survive a bank run by

According to the quantity theory of money,if the money supply grows at 6%,real GDP grows at 2%,and the velocity of money is constant,then the inflation rate will be