Exam 4: The Monetary System: What It Is and How It Works

When the Fed makes an open-market sale, it:

The Federal Reserve wants to increase the money supply by printing and distributing 1 million dollars worth of currency notes. What will be the actual increase in money supply if the public holds one fourth of the currency as cash, and deposits rest of the money in banks that hold 5 percent of their deposits as reserves?

When banks borrow through the Term Auction Facility, the price of borrowing is determined by:

Money market mutual fund shares are included in:

If the monetary base fell and the currency-deposit ratio rose but the reserve-deposit ratio remained the same, then:

Credit card balances are included in:

The more funds that the Federal Reserve makes available for banks to borrow through the Term Auction Facility, the _____ the monetary base and the _____ the money supply.

People use money as a medium of exchange when they:

The monetary base consists of:

Checking account balances that are linked to debit cards are included in:

In 1932, the U.S. government imposed a two-cent tax on checks written on deposits in bank accounts. This action would be expected to ______ the currency-deposit ratio and ______ the money supply.

If the Federal Reserve increases the interest rate paid on reserves, banks will tend to hold _____ excess reserves, which will _____ the money multiplier.

If many banks fail, this is likely to:

The preferences of households determine the:

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

The most frequently used tool of monetary policy is:

The money supply will decrease if the:

In a fractional-reserve banking system, banks create money when they:

When the Fed increases the discount rate, it:

In a system with 100-percent-reserve banking: