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The interest rate that banks charge on another for the loan of excess reserves is the:
Federal funds rate
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Refer to the figure. If the Federal funds market is at equilibrium point C and the Federal Reserve decides to conduct an open-market sale, then it must be trying to set a
Higher target federal funds rate by reducing the amount of reserves in the market
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The transactions demand for money will shift to the:
Left when nominal GSP decreases
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The Federal Reserve can increase aggregate demand by:
Reducing the discount rate
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In which case would the quantity of money demanded by the public tend to increase by the greatest amount?
The interest rate decreases and nominal GDP increases.
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Refer to the graph, in which Dt is the transactions demand for money, Dm is the total demand for money, and Sm is the supply of money. If the interest rate was 4 percent, the asset demand for money would be:
200
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Lowering the discount rate has the effect of:
Making it less expensive for commercial banks to borrow from central banks.
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The major problem facing the economy is high unemployment and weak economic growth. The inflation rate is low and stable. Therefore, the Federal Reserve decides to pursue a policy to increase the rate of economic growth. Which policy changes by the Fed would tend to offset each other in trying to achieve that objective?
Buying government securities and raising the discount rate
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Which line in the graph would best reflect the slope of the transactions demand for money curve?
Line 2
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Other things equal, an appreciation of the U.S. dollar would:
Decrease net exports and decrease aggregate demand
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Answer the question on the basis of the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 10%. All figures are in billions.
$0 billion
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The amount that a commercial bank can lend is determined by its:
excess reserves
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If D equals the maximum amount of new demand-deposit money that can be created by the basis of any given amount of excess reserves; E equals the amount of excess reserves; and m is the monetary multiplier, then:
D=Exm
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A bank that has assets of $85 billion and a net worth of $10 billion must have:
liabilities of $75 billion
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If a portion of the loans extended by commercial banks is taken as cash rather than as checkable deposits, the maximum money-creating potential of the commercial banking system will:
decrease
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The reserve ratio refers to the ration of a banks:
required reserves to its checkable-deposit liabilities
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(Last Word) The bank panics of 1930-1933 and the resulting failures of many banks were caused by:
the widespread conversion of checkable deposits to cash by the public
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Answer the question on the basis of the following information about a banking system new currency deposited in the system=$40 billion; legal reserve ratio=0.20; excess reserves prior to the currency deposit=$0 Refer to the information: The $40 billion deposit of new currency will support total checkable deposits of:
$200 billion
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(Last Word) Which of the following resulted from the financial crisis of 2007-2008?
FDIC insurance was increased from $100,000 to $250,000 per account
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When commercial banks use excess reserves to buy government securities from the public
new money is created
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In the U.S. economy the money supply is controlled by the:
Federal Reserve System
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(Consider This) Credit card balances are:
not a component of M1 or M2
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To say money is socially defined means that
whatever performs the functions of money extremely well is considered to be money.
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If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as:
a medium of exchange
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Which of the following is not part of the M2 money supply?
large-denominated time deposits
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Other things equal, an excessive increases in the money supply will:
decrease the purchasing power of each dollar
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Answer the question on the basis of the following list of assests:
1. Large-denominated ($100,000 and over) time deposits
2. Noncheckable savings deposits
3. Currency (coins and paper money) in circulation
4. Small-denominated (under $100,000) time deposits
5. Stock certificates
6. Checkable deposits
7. Money market deposit accounts
8. Money market mutual fund balances held by individuals
9. Money market mutual fund balances held by businesses
10. Currency held in bank vaults
items 2, 4, 7, and 8
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The near-money components of M2 are:
less liquid than the M1 components of M2
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Banks lost money during the mortgage default crisis because:
of all of these reasons
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Paper money (currency) in the United States is issued by the:
Federal Reserve Banks
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