quiz 10 ECON

If the reserve ratio is equal to 5% then what is the value of the money multiplier? Enter a number rounded to two decimal places.

20

All interest rates in the economy are set by the Federal Reserve.
True
False

false

Currency is part of M1 but not part of M2.
True
False

false

Bank 1 has deposits of $4164 and reserves of $467. If the required reserve ratio is 10%, what is the value of the bank's excess reserves? Enter a whole number with no dollar sign. Round to the nearest whole number.

51

If the reserve ratio increases then the money multiplier will increase.
True
False

false

Suppose we deposit $565 worth of currency into the bank. Banks make as many loans as possible, people hold no additional currency, and the reserve ratio is 15%. As a result of the loan process, what is the value of total deposits in the banking system? En

3767

Bank 1 has deposits of $5674 and reserves of $1070. If the required reserve ratio is 10%, then what is the largest loan the bank can make? Enter a whole number with no dollar sign. Round to the nearest whole number.

5609

Consider the T-account for Bank 1. When customers deposit funds into their checking accounts, there is an increase in Bank 1's assets and its liabilities.
True
False

true

The $20 bill is an example of commodity money.
True
False

false

Savings deposits are part of M2 but not part of M1.
True
False

true

If the Fed wants interest rates to fall they will buy U.S. government bonds.
True
False

true

When credit card companies increase the credit limits for their customers, this increase the money supply in the economy.
True
False

false

Bank 1 loans $20,000 to a customer. The customer takes the $20,000 and buys a car. When the loan is made, how is the bank's t-account (balance sheet) affected?
loans decrease and deposits increase
loans increase and deposits increase
loans decrease and re

loans increase and reserves decrease

All else the same, if households choose to hold more currency the money supply will fall.
True
False

true

Stocks and bonds are considered to be less liquid types of assets than a house or a car.
True
False

false

When banks make loans, they create money.
True
False

true

when you compare the prices of two goods, you are using money as a unit of account.
True
False

true

If the Fed wants to increase the money supply they will buy U.S. government bonds.
True
False

true

If the banking system as a whole has reserves equal to $537 and the reserve ratio is 18% then what is the value of deposits, assuming banks hold no excess reserves? Enter a whole number with no dollar sign. Round to the nearest whole number.

2983

The Fed frequently changes reserve requirements.
True
False

false

Bank 1 has deposits of $4428 and reserves of $695. If the required reserve ratio is 10%, what is the value of the bank's required reserves? Enter a whole number with no dollar sign. Round to the nearest whole number.

443

Money includes only the few types of wealth that are regularly accepted by sellers in exchange for goods and services.
True
False

true

In a fractional reserve banking system
the reserve ratio measures the percentage of deposits available to be lent out.
banks hold a fraction of deposits as reserves.
banks hold a fraction of reserves as deposits.
banks do not make loans.

banks hold a fraction of deposits as reserves.

All else the same, if banks choose to hold fewer excess reserves the money supply will fall.
True
False

false

The purchase of U.S. government bonds by the Fed is called:
discount window lending.
fractional reserve banking.
the money multiplier.
open market operations.

open market operations.