Multiple Choice Questions

Money Multiplier
  • Amount of money the banking system generates with each dollar of reserves
  • Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
  • An institution that oversees the banking system and regulates the money supply
  • An item people can use to transfer purchasing power from the present to the future, durable
What happens if the Fed sells government bonds to banks?
  • Bank reserves decrease and so does the money supply
  • both 100-percent-reserve banking and fractional-reserve banking.
  • commodity money has intrinsic value but fiat money does not.
  • Loans, reserves, securities
Currency
  • Exchange of one good or service for other goods and services
  • Takes the form of a commodity with intrinsic value
  • The paper bills and coins in the hands of the public
  • the rate at which the Fed lends to banks.
Demand Deposits
  • An item buyers give to sellers when they want to purchase goods and services, divisible
  • An institution that oversees the banking system and regulates the money supply
  • The yardstick people use to post prices and record debts, portable
  • Balances in bank accounts that depositors can access on demand by writing a check
What is achieved by monetary policy?
  • Price stability and economic growth
  • All of the above are correct.
  • credit cards but not debit cards
  • =change in bank reserves X money multiplier
What happens to reserves when the Fed makes loans to banks
  • It increases
  • Economic growth
  • Bank reserves decrease and so does the money supply
  • increases.
Double coincidence of wants
  • Unlikely occurrence that two people each have a good the other wants-- waste of resources
  • An item people can use to transfer purchasing power from the present to the future, durable
  • Regulations on the minimum amount of reserves that banks must hold against deposits, controlled by the Fed
  • 1. Trade would require barter2. Every transaction would require a double coincidence of wants
Capital Requirement
  • An item buyers give to sellers when they want to purchase goods and services, divisible
  • Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
  • Minimum percent of deposits that banks must keep as reserves
  • A government regulation that specifies a minimum amount of capital, intended to ensure banks will be able to pay off depositors and debts
Reserve ratio (R)
  • Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
  • An institution that oversees the banking system and regulates the money supply
  • Resources a bank obtains by issuing equity to its owners
  • Minimum percent of deposits that banks must keep as reserves
Examples of fiat money
  • Located around the U.S.
  • U.S. dollar
  • 1. Commodity money2. Fiat money
  • Purchase and sale of US government bonds by the Fed
3 Functions of Money
  • commodity money has intrinsic value but fiat money does not.
  • 1. Medium of Exchange2. Unit of Account3. Store of Value
  • Ratio of assets to bank capital, total assets/bank capital
  • 1. Commodity money2. Fiat money
What is included in liabilities (owe)
  • Price stability and economic growth
  • Deposits, Debt, Equity (capital)
  • credit cards but not debit cards
  • Loans, reserves, securities
Unit of Account
  • the most liquid asset but an imperfect store of value.
  • The paper bills and coins in the hands of the public
  • Resources a bank obtains by issuing equity to its owners
  • The yardstick people use to post prices and record debts, portable
Leverage Ratio
  • An institution that oversees the banking system and regulates the money supply
  • Quantity of money available in the economy
  • Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
  • Ratio of assets to bank capital, total assets/bank capital
Examples of Commodity money
  • Gold coins, cigarettes
  • Term Auction Facility
  • 1. Commodity money2. Fiat money
  • Loans, reserves, securities
Barter
  • 1. M12. Saving deposits3. Small time deposits4. Money market mutual funds
  • The paper bills and coins in the hands of the public
  • Exchange of one good or service for other goods and services
  • Purchase and sale of US government bonds by the Fed
Federal Reserve (the Fed)
  • Regulations on the minimum amount of reserves that banks must hold against deposits, controlled by the Fed
  • 1. Commodity money2. Fiat money
  • The central bank of the U.S.
  • makes trade easier.
Fiscal Policies
  • Carried out by the government and adjusted taxes and government spending
  • The yardstick people use to post prices and record debts, portable
  • An institution that oversees the banking system and regulates the money supply
  • Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
How the Fed influences reserves now
  • $10,000 of new money.
  • Term Auction Facility
  • makes trade easier.
  • M2 but not M1.
Open-Market Operations
  • The paper bills and coins in the hands of the public
  • Purchase and sale of US government bonds by the Fed
  • uncommon because of FDIC deposit insurance.
  • Minimum percent of deposits that banks must keep as reserves
What is achieved by fiscal policies?
  • Economic growth
  • U.S. dollar
  • It increases
  • Term Auction Facility
Federal Open Market Committee
  • Amount of money the banking system generates with each dollar of reserves
  • 1. Board of Governors2. 12 Regional Fed banks3. Federal Open Market Committee (FOMC)
  • Purchase and sale of US government bonds by the Fed
  • Includes Board of Governors, decides monetary policy
Fiat money
  • An institution that oversees the banking system and regulates the money supply
  • Takes the form of a commodity with intrinsic value
  • Money without intrinsic value, used as money because of government decree
  • The yardstick people use to post prices and record debts, portable
Commodity money
  • Money without intrinsic value, used as money because of government decree
  • Takes the form of a commodity with intrinsic value
  • Quantity of money available in the economy
  • The paper bills and coins in the hands of the public
Central Bank
  • Money without intrinsic value, used as money because of government decree
  • An institution that oversees the banking system and regulates the money supply
  • Carried out by the government and adjusted taxes and government spending
  • The interest rate on loans the Fed makes to banks
Fractional Reserve Banking System
  • Banks keep a fraction of deposits as reserves and use the rest to make loans
  • True
  • Bank reserves decrease and so does the money supply
  • 1. Trade would require barter2. Every transaction would require a double coincidence of wants
How can the Fed change the money supply (2)
  • borrow more from the Fed and lend more to the public. The money supply increases.
  • Currency may be a preferable store of wealth for criminals.
  • 1. Changing the bank reserves2. Changing the money multiplier
  • =change in bank reserves X money multiplier
Bank Capital
  • Resources a bank obtains by issuing equity to its owners
  • The yardstick people use to post prices and record debts, portable
  • The interest rate on loans the Fed makes to banks
  • Carried out by the government and adjusted taxes and government spending
Reserve ratio formula
  • Purchase and sale of US government bonds by the Fed
  • Minimum percent of deposits that banks must keep as reserves
  • Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
  • Total reserves/ total deposits X 100
Bank Capital formula
  • Term Auction Facility
  • Assets- Liabilities
  • Deposits, Debt, Equity (capital)
  • Loans, reserves, securities
Money
  • 200 million tazes
  • 1. Board of Governors2. 12 Regional Fed banks3. Federal Open Market Committee (FOMC)
  • 1. Currency2. Demand deposits3. Traveler's checks4. Other checkable deposits
  • Group of safe assets that households and businesses can use to make payments or to hold as short-term investments
What does the Fed system consist of? (3)
  • 1. Board of Governors2. 12 Regional Fed banks3. Federal Open Market Committee (FOMC)
  • The setting of the money supply by policymakers in the central bank, carried out by central bank
  • 1. Changing the bank reserves2. Changing the money multiplier
  • 200 million tazes
How the Fed traditionally influences reserves
  • All of the above are correct.
  • borrow more from the Fed and lend more to the public. The money supply increases.
  • Term Auction Facility
  • Adjusting the discount rate
Money Supply
  • Balances in bank accounts that depositors can access on demand by writing a check
  • Quantity of money available in the economy
  • =change in bank reserves X money multiplier
  • Fraction of deposits that banks hold as reserves, total reserves as a percentage of total deposits
2 Types of Money:
  • M= C+DC= CurrencyD= Demand Deposits
  • 1. Commodity money2. Fiat money
  • commodity money and function as a unit of account.
  • =change in bank reserves X money multiplier
What is included in assets (own)
  • Economic growth
  • Located around the U.S.
  • Price stability and economic growth
  • Loans, reserves, securities
T-Account
  • The yardstick people use to post prices and record debts, portable
  • Resources a bank obtains by issuing equity to its owners
  • An institution that oversees the banking system and regulates the money supply
  • A simplified accounting statement that shows a bank's assets and liabilities
Medium of Exchange
  • Balances in bank accounts that depositors can access on demand by writing a check
  • 7 members, located in Washington D.C.
  • Carried out by the government and adjusted taxes and government spending
  • An item buyers give to sellers when they want to purchase goods and services, divisible
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Multiple Choice Questions
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