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16 Cards in this Set

  • Front
  • Back
  • 3rd side (hint)
Which of the following is the most liquid form of asset?
travelers' checks
a. small time deposits
b. large time deposits
c. savings accounts
d. money market mutual fund (MMMF) balances
e. travelers' checks
When economists and government officials speak about the money supply, they usually mean M2.
True or False?
False
Which of the following is not included in the M1 money stock?
small time deposits
a. small time deposits
b. demand deposits
c. checking account deposits
d. travelers' checks
e. cash in the hands of the public
If the required reserve ratio is 0.2, and a bank has $100 million in demand deposits and $40 million in
property and buildings, it must hold reserves of at least
$20 million
Which of the following groups exerts the most control over the money supply in the United States?
the Federal Reserve
The Federal Open Market Committee (FOMC) controls the U.S. money supply by buying and selling loans in
the public loan market.
True or False?
False
An important function of the Federal Reserve is
clearing checks
The formula for the demand deposit multiplier is
1.0 divided by the required reserve ratio
If the required reserve ratio is 0.2, the demand deposit multiplier is
5
When banks create money, they
do not create wealth
If the required reserve ratio (RRR) is 10 percent and the Fed sells a $10,000 bond directly to First National
City Bank, the immediate change in the money supply will be
no change
If the required reserve ratio is 20 percent, banks loan out all excess reserves, people hold no currency, and the Fed sells $5,000 worth of bonds to banks, what is the ultimate impact on the money supply?
The money supply will decrease by $25,000
Examples of Fed actions that could decrease money supply are making open market...
sales, increasing the required reserve ratio, and increasing the discount rate
Which of the following would lead to a decrease in the money supply?
The Fed sells government bonds.
a. Banks decide to use excess reserves to purchase corporate bonds.
b. The Fed decreases the discount rate.
c. The Fed decreases the required reserve ratio.
d. The Fed sells government bonds.
e. The Fed purchases government bonds.
A bank can only fail if it is not in good financial health.
True or False
False
Congress created the Federal Deposit Insurance Corporation to
reimburse those who lose their bank deposits