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Money
Banking and the Money Supply
Monetary Policies
Loanable Funds Market
Finances
100
This kind of money is acceptable as payment for transactions because the government which issues it says it has value.
What is fiat money?
100
If the legal reserve requirement is 25 percent, the value of the money multiplier is:
What is 4?
100
The money supply curve has this shape.
What is vertical?
100
In the market for loanable funds, the behavior of ____________ is represented in the demand curve, and that of ____________ in the supply curve.
What are borrowers and lenders? (or investors and savers)
100
When an asset can easily be converted into cash, it's called this
What is liquid?
200
These are counted in the M1 money supply.
What are currency in circulation, travelers' checks, and demand deposits?
200
If a bank customer deposits $100 cash, and the required reserve ratio is 20%, then the bank's excess reserves initially increase by _______ because of this transaction.
What is $80?
200
The three policy tools of the Federal Reserve
What are the reserve requirement, the discount rate, and open market operations?
200
On the graph for loanable funds, the y-axis label is this.
What is the real interest rate?
200
National savings is comprised of these two things
What are private savings and public savings (or the budget balance)?
300
The statement, "It will cost you $30 to buy this sweater." expresses this role of money.
What is a medium of exchange?
300
The system by which banks keep a percentage of demand deposits on hand but then loan out the rest.
What is "fractional reserve banking"?
300
Two examples of contractionary monetary policies.
What are: increase the reserve requirement; increase the discount rate; or buy bonds? (Any 2)
300
When the government runs a budget deficit and must borrow money to meet its spending needs, the equilibrium interest rate increases. This causes private investment to decline, a market phenomenon called______ .
What is crowding out?
300
Loans, stocks, bonds, and bank deposits
What are financial assets?
400
When a menu lists the prices for various entrees, we see money acting as a ...
What is a unit of account?
400
Open market operations are conducted by this part of this institution.
What is the Federal Reserve's Open Market Committee?
400
When the Fed lowers the discount rate, the nominal interest rates will (increase/decrease)?
What is decrease?
400
Tax incentives to invest in new technology affect the loanable funds market in this way.
What is increase the demand?
400
Placing savings in a wide variety of financial assets with unrelated or independent risks, in order to reduce risk
What is diversification?
500
Two phenomena that would increase the demand for money?
What are: an increase in the price level and an increase in disposable income? (or a decrease in wealth, or a change in technology)
500
Suppose the Federal Reserve buys $200,000 worth of U.S. Treasury bills from a bank. If the reserve requirement is 10 percent and banks hold no excess reserves, the total money supply will (increase/decrease)by $_________ .
What is increase by $2 million?
500
If the Fed uses monetary policy to close a recessionary gap, what will probably happen to bond prices?
Bond prices will increase.
500
If more foreigners decide to buy American stocks, it impacts the real interest rate in this way.
What is decrease it?
500
Mutual funds, pension funds, life insurance companies, and banks
What are financial intermediaries?