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Money
Banking and the Money Supply
Monetary Policies
Loanable Funds Market
Finances
100
The United States dollar is an example of this type of currency.
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 vertical money supply curve is controlled by this quasi-government body.
What is the Federal Reserve (or the central bank)?
100
The difference between the nominal and real interest rates is this.
What is the inflation rate?
100
When an asset can easily be converted into cash, it's called this
What is liquid?
200
Currency in circulation + demand deposits
What is the M1 money supply?
200
If a bank customer deposits $100, and the required reserve ratio is 20%, then the bank's excess reserves increase by _______ because of this initial 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
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?
200
National savings is comprised of these two things
What are private savings and public savings (or the budget balance)?
300
The statement, "This meal was worth every penny of $10." expresses the role of money as a _________ .
What is a unit of account?
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 a market phenomenon called______ .
What is crowding out?
300
Loans, stocks, bonds, and bank deposits
What are financial assets?
400
When a financial transaction or trade is made using a currency, that currency is acting as a _______
What is a medium of exchange?
400
Open market operations are conducted by this bank.
What is the Federal Reserve Bank of New York?
400
When the Fed lowers the discount rate, the nominal interest rates will (increase/decrease)?
What is decrease?
400
An increase in savings will have this impact on the supply of loanable funds.
What is increase it?
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
Increases in foreign capital inflows impact the supply of loanable funds in this way.
What is increase the supply?
500
Mutual funds, pension funds, life insurance companies, and banks
What are financial intermediaries?