Uncategorized

Discuss this statement: “A man with a million dollars who is lost in the desert learns the meaning of money.” Could each of the following items potentially serve as money? Consider each as (1) a medium of exchange, (2) a unit of account, and (3) a store of value. a. Visa credit card.b. Federal Reserve […]

What is the major purpose of the Federal Reserve System? What is the major responsibility of the Board of Governors and the Federal Open Market Committee? Should the Fed be independent or a government agency subordinate to Congress and the president?

M1 refers to a. the most narrowly defined money supply.b. currency held by the public plus checking account balances.c. the smallest dollar amount of the money supply definitions.d. All of the answers above are correct.

The easier it is to convert an asset directly into goods and services without loss, the a. less secure it is.b. more secure it is.c. more liquid it is.d. less liquid it is.

The M1 definition of the money supply consists of a. coins and currency in circulation.b. coins and currency in circulation, and check-able deposits.c. Federal Reserve notes, gold certificates, and checkable deposits.d. Federal Reserve notes and bank loans.

Which of the following items is not included when computing M1? a. Coins in circulation.b. Currency in circulation.c. Savings accounts.d. Checking account entries.

If the Fed decides to engage in an open market operation to increase the money supply, what will it do? a. Sell Treasury bonds, bills, or notes on the bond market.b. Buy Treasury bonds, bills, or notes on the bond market.c. Increase the required reserve ratio.d. Increase the fed funds rate.

If a bank has total deposits of $100,000 with$10,000 set aside to meet reserve requirements of the Fed, its required reserve ratio is a. $10,000.b. 10 percent.c. 0.1 percent.d. 1 percent.

__________ plus__________ plus__________ equals. a. Total deposits, loans, required reserves, excess reserves.b. Loans, required reserves, excess reserves, total deposits.c. Required reserves, total deposits, excess reserves, loans.d. Excess reserves, loans, total deposits, required reserves.

The Best National Bank operates with a 10 percent required reserve ratio. One day a depositor withdraws $400 from his or her checking account at the bank. As a result, the bank’s excess reserves a. fall by $400.b. fall by $360.c. fall by $40.d. rise by $400.