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

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The quantitative easing policy conducted by the Federal Reserve between 2007 and 2011 resulted in a large increase in the monetary base that was partially offset by:

The table below represents the balance sheet of a bank. What is the leverage ratio of the bank, and what does it mean?

Money's liquidity refers to the ease with which:

All of the following are considered major functions of money except as a:

When the Fed increases the interest rate paid on reserves, it:

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:

To reduce the money supply, the Federal Reserve:

What is the effect of the following on the money supply? a. Increase in currency-deposit ratio, keeping all other things constant b. Decrease in reserve-deposit ratio, keeping all other things constant

All of the following assets are included in M1 except:

Liabilities of banks include:

The size of monetary base is determined by:

An important factor in the evolution of commodity money to fiat money is:

The minimum amount of owners' equity in a bank mandated by regulators is called a _____ requirement.

Assets of banks include:

Some economists have advocated replacing government deposit insurance with 100-percent- reserve banking. Under this plan, banks would hold all deposits as reserves. Deposit insurance would no longer be necessary, because banks would always have the reserves to meet customer withdrawals. a. What would happen to the money supply (defined as currency and bank deposits) in the transition from fractional-reserve to 100 -percent-reserve, if this plan were implemented, holding other factors constant? b. What will be the value of the money multiplier?

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

If the reserve-deposit ratio is less than one, and the monetary base increases by $1 million, then the money supply will:

If the Federal Reserve wishes to increase the money supply, it should:

When the Fed decreases the interest rate paid on reserves, if the ratio of currency to deposits decreases also while the monetary base is constant, then: