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32 Cards in this Set
- Front
- Back
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The flow of money has a direct effect on how the economy performs
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True
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Liquidity is variavle, depending on the nature of the asset
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True
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MZM is sometimes referred to as the "base" money supply
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False
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The agreed-upon value of money it has on deposit, minus the reserve requirement
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False
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Banks can loan customers the money it has on deposit, minus the reserve requirement
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True
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A bank may not use excess reserves to give depositors their money back if they demand it
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False
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Most large money transactions involve ledger entries rather than the movement of physical currrency
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True
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A dollar bill represents an obligation of the government to provide a commodity of value to you
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False
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Generally speaking, when interest rates are high more credit is accessible and the economy tends to grow quickly
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False
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The prime rate is usually the same among major banks
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True
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If there is too much money moving in the economy
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prices may rise, causing inflation
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Which of the following assets is the most liquid?
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the money in your wallet
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Which of the following elements of the money supply, as defined by the Federal Reserve, can be spent immediately?
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M1
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The official currency of the United States can properly be classified as
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Fiat money
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Which of the following is NOT considered a factor in money creation?
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the printing of currency by the Bureau of Engraving and Printing
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Which of the following would be considered a secondary reserve for a bank?
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securities the bank has purchased from the Federal government
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Money on deposit, minus ____, can be loaned by banks to customers.
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the reserve requirement
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If banks must hold more money in reserve,
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there is less money available to lend
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The interest rate the Federal Reerve charges for loans to member banks is called the
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discount rate
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The Federal Reserve influences the federal funds rate by
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buying and selling government securities
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The _______ supply is defined as the liquid assets held by banks and individuals.
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money
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The measure of how quickly things may be converte to something of value is called __________.
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liquidity
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MZM is measure of the annual ________ in the money supply
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change
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________ measures are tools used to estimate the size of the money supply
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aggregate
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______ money is based on some item of value, such as gold or precious stones
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commodity
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________ money is money that is deemed legal tender by a government.
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Fiat
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Resources a bank uses to create money through its business transactions are called ____________ reserves.
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excess
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The ____________ effect is a phenomenon that creates new deposits from lending.
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multiplier
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The federal _____ rate is the amount of interest charged for short-term, interbank loans.
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funds
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The __________ rate is the interest rate the Federal Reserve sets and charges for loans to member banks.
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discount
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Calculate the total of money "created" from a deposit of $10,000 as it moves through four cycles of deposit. Assume a reserve rate of 12 percent. (Round answer to nearest two decimal places.)
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1) 10,000 x .12= 1200
10,000-1200= 8,800 2) 8,800 x .12= 1,056 8,800-1,056=7,774 3) 7,774 x .12= 929.28 7,774-929.28= 6,814.72 4) 6,814.72 x .12= 817.77 6,814.72-817.77=5,996.95 Total= $29,355.67 |
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Calculate the total amount of money "created" from a deposit of $5,000 as it moves through four cycles of deposit. Assume a reseve rate of 15 percent. (Tound answer to nearest two decimal places.)
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1) $5,000 x .15 = 750
5,000-750= $4,250 2) $4,250 x .15 = 637.50 4,250-637.50= 3,612.50 3) $3,612.50 x .15= 541.88 3,612-541.88= 3,070.62 4) $3,070.62 x .15= 460.59 3,070.62-460.59= 2,610.03 Total Deposits: $13,543.15 |
