Exam 25: Money, Banks, and the Federal Reserve System

Suppose there is a bank panic. Which of the following would not be a consequence of this bank panic?

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

Suppose that the required reserve ratio is 10 percent and you withdraw $25,000 from Comerica Bank. What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?

Suppose you deposit $2,000 into Bank of America and that the required reserve ratio is 10 percent. How does this affect the bank's balance sheet?

Money market mutual funds sell shares to investors and use the money to buy

Using the five criteria in the book, explain how U.S. currency is suitable to use as a medium of exchange.

To decrease the money supply, the Federal Reserve could

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

A bank is legally required to hold a fraction of its ________ as ________.

A bank will consider a car loan to a customer ________ and a customer's checking account to be ________.

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

A bank's assets are

If people speculate that a run on one bank will cause a run on all banks in the financial system, and this speculation proves accurate, then the financial system would experience what is known as a

The Federal Reserve was established in 1913 to

The M2 measure of the money supply equals

When a government has a budget deficit, it must issue (sell) government bonds to finance the deficit. Does it matter for the rate of inflation if the government sells the government bonds to the public or sells the government bonds to the central bank? Explain why it does or does not matter.

A barter economy is an economy where

Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve raises the required reserve ratio to 12 percent, then the bank will now have excess reserves of

The Federal Open Market Committee consists of the seven members of the ________, the president of the Federal Reserve Bank of New York, and ________.

How do open market operations work?