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ECO 372 Assignment Week 4 Practice Money and the Federal Reserve Quiz (100% Correct) (All Possible Questions/Answers)
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ECO 372 Assignment Week 4 Practice Money and the Federal Reserve Quiz (100% Correct) (All Possible Questions/Answers)

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  1. Determine which of the Federal Reserve entities controls each of the following policy tools.
  2.  
    1. The reserve requirement is determined by the

Board of Governors.

 

 

  1. b. Open market operations are determined by the:

Federal Open Market Committee.

 

  1. suppose that Ava withdraws $300 from her savings account at Second Bank. The reserve requirement facing Second Bank is 10%. Assume the bank does not wish to hold any excess reserves of new deposits.  

 

  1. Use this information to complete the balance sheet below to show how Second Bank's assets and liabilities change when Ava withdraws the $300 from the bank.

 

 

 

  1. Suppose the Federal Reserve increases the amount of reserves by $100 million and the total money supply increases by $500 million.

 

  1. Instructions: Enter your answers as a whole number.

 

  1. What is the money multiplier?

 

 

  1. Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $50 million?

 

 

  1. The part of the Federal Reserve that determines and implements the nation's monetary policy and controls the money supply to promote stable prices and economic growth is the:

 

  1. Money is:

 

  1. For each of the following scenarios, determine whether money is being used as a medium of account, store of value, or unit of account.

 

  1. Sam gives the grocery store clerk a $5 bill to pay for his purchase
  2. Bill looks at the $20 price tag on a clock to see how much money he would need to purchase it.

 

  1. Maria writes a check to pay her electric bill. 

 

  1. Susan transfers some of her wealth from her checking account into a certificate of deposit that earns interest.  

 

  1. Explain the changes in M1 and M2 for each of the following scenarios.

 

 

  1. If you put a $20 bill in the pocket of your winter coat at the beginning of spring so that you will be surprised when you find it again next winter, you are using money as

 

 

  1. The equilibrium rate of interest in the market for money is determined by the intersection of the

 

 

  1. Which of the following are liabilities to a bank?

 

  1. The reason for the Fed being set up as an independent agency of government is to
  2. Money eliminates the need for a coincidence of wants in trading primarily through its role as a

 

  1. The Federal Open Market Committee (FOMC)

 

  1. Which definition(s) of the money supply include(s) only items that are directly and immediately usable as a medium of exchange?

 

  1. M1
  2. The M2 measure of money consists of the sum of

 

  1. M1, savings deposits, small time deposits, and money market mutual funds.
  2. A checkable deposit at a commercial bank is a(n)

 

  1. asset to the depositor and a liability to the bank.

 

  1. Assets of the commercial banking system include

 

  1. The Federal Reserve System was established by the Federal Reserve Act o

 

  1. The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for

 

  1. Money is "created" when

 

  1. The Federal Reserve System consists of which of the following?

 

  1. The required-reserve ratio is equal to a commercial bank’s

 

  1. The M1 measure of money consists of the sum of

 

  1. Members of the Federal Reserve Board of Governors are

 

  1. Other things being equal, an expansion of commercial bank lending

 

  1. If the reserve requirement is 20% and commercial bankers decide to hold additional excess reserves equal to 5% of any newly acquired checkable deposits, then the effective monetary multiplier for the banking system will b

 

  1. 4.
  2. When a consumer wants to compare the price of one product with another, money is primarily functioning as a

 

  1. unit of account.

 

  1. The coupon rate is the

 

  1. Use the following graph to answer the next question.

 

  1. Which line in the graph would best illustrate the supply of money curve
  2. If the reserve requirement were 15% percent, the value of the monetary multiplier would be

 

  1. A bank's required reserves can be calculated by

 

  1. A bank has $2 million in checkable deposits. In the bank's balance sheet, this would be part of

 

  1. Use the following graph to answer the next question.

 

  1. Which line in the graph above would best illustrate the asset demand for money curve?

 

  1. f product prices were stated in terms of tobacco leaves, then tobacco leaves would be functioning primarily as

 

  1. A consumer holds money to meet spending needs. This would be an example of the
  2. Traditionally, the Federal Reserve can give emergency loans only to

 

  1. Which group is responsible for the policy decision of changing the money supply?

 

  1. Credit card balances are not considered to be money primarily because they
  2. Fractional reserve banking refers to a system where banks

 

  1. One hundred percent reserve banking refers to a situation in which banks' reserves equal One hundred percent of their

 

  1. The transactions demand for money is least likely to be a function of the

 

  1. The main function of the Federal Reserve System is to

 

  1. A bank’s net worth is equal to its

 

  1. An increase in nominal GDP will

 

  1. The functions of money are to serve as a

 

  1. Which of the following items are included in money supply M2 but not M1?

 

  1. What function is money serving when you deposit it in a savings account?

 

  1. Assume that the required reserve ratio is 20%. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the reserves at Bank A and Bank B?

 

  1. One year before maturity the price of a bond with a principal amount of $1,000 and a coupon rate of 5% paid annually fell to $981. The one year interest rate must be

 

  1. The Federal Reserve District Banks are divided:

 

  1. Money functions as a store of value if it allows you to

 

  1. A wealthy executive is holding money, waiting for a good time to invest in the stock market. This action would be an example of the

 

  1. Use the following table to determine the levels of M1 and M2 in the United State
  2. Money Categories in the United States

 

  1. Calculate the M1 money supply.

 

 

  1. Calculate the M2 money supply.

 

 

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