Money!
The United States Dollar is an example of which type of money? (It has value because the Gov't says so!)
What is a fiat currency?
The money multiplier formula.
What is 1/res req?
The vertical money supply curve Ms is controlled by what government body and in a limited reserve model what is the main tool used to change the Ms?
What is the Federal Reserve and open market operations.
What is Administered Rates?
As of May, this coin is currently no longer being minted but is still legal tender and accepted. (Shortages have already started to happen)
What is the penny
Give me two reasons people demand money from our notes:
Transaction demand and Asset demand
Solve: If the reserve requirement is 25 percent, the value of the money multiplier is…
What is 4?
Main monetary policy in an ample reserves system.
Interest on Reserves (IORB)
The name for the rate that the Fed targets but does not have direct control over.
What is the policy rate or Federal Funds Rate?
Correctly draw and label the money market graph
Graph
What are the three functions of money?
What is the store of value, unit of account, and medium of exchange
M1 of the money supply is comprised of: (3 things)
What is Cash/coins, checkable deposits, and savings accounts.
Give two examples of contractionary monetary policy actions that could be used.
Answers vary: Increase Reserve Req, Increase Interest Rates (Discount and/or IOR), Sell Bonds
Monetary tool used in response to high inflation in an ample reserves system.
What is raising interest on reserves (So banks keep more with the Fed instead of loaning it out)
Can also say increase Administered Rates.
This president is on the 100,000 dollar bill.
Who Woodrow Wilson?
When a financial transaction or trade is made using fiat currency. That currency is acting as a...
What is a medium of exchange?
Bank panics and runs were virtually eliminated by the introduction of this government guarantee. How much is guaranteed?
What is the Federal Deposit Insurance Corporation and 250k per account
In an ample reserve system what would the Fed do if it wanted to enact expansionary monetary policy?
Lower interest on reserves (IORB)
if the demand for money increases or to combat a recessionary period what is the name for the policy actions the Fed would undertake?
What is an expansionary monetary policy?
In a limited reserves model what happens to the Money Supply and AD if the Fed were to buy bonds? What is this policy called? (3 part answer)
What is the MS will increase and AD will increase. what is Open market operations (Expansionary policy)
What composes M2 currency?
What is M2 includes everything in M1 + money market mutual funds, CD's, and other short time deposits.
Suppose the Federal Reserve buys $200,000 worth of securities on the open market. If the reserve requirement is 10 percent and the banks hold no excess reserves, what is the maximum change to the total money supply?
What is 2 million dollars?
Draw and correctly label an ample reserves graph.
Graph:
If interest rates go up, what happens to bond prices/value?
Solve: In a limited reserves model, the required reserve ratio is 10%, the bank holds no excess reserves. It has $100,000 in checkable deposits and has already loaned out $60,000. How much more can it loan out and what is the total change in the money supply from the $100,000 in checkable deposits? (2 part answer)
Res Req = $10,000
Excess Res = $90,000 (It's already loaned out $60,000). Additional amount it can loan out = $30,000.
Change in Money supply from $100,000 in Checkable deposits = $90,000 x 10 (multi)= $900,000