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30 terms

Macro Ch. 11 Practice

In a barter system,
an individual offers one good or service to get another good or service
Which of the following is not a function of money?
to provide a double coincidence of wants
Which of following is not an important characteristic of money?
has commodity value
Commodity money is something
that has an intrinsic value
A government receives seigniorage whenever it
mints coins whose face value is greater than the value of the resources used up in producing the money
Under a fractional reserve banking system
bank reserves represent only a fraction of bank deposits
Some financial institutions are known as financial intermediaries because they serve as go-betweens that link
savers and borrowers
Which of the following is a depository institution
a credit union
Federal Reserve banks do all of the following except one. Which is the exception?
hold deposits of households and firms
The discount rate is
the interest rate charged by the Federal Reserve banks on loans to banking institutions
The FDIC insures deposits in
any banking institution that purchases FDIC insurance
The purpose of deregulating banks during the 1980s was to
allow banks to compete with other financial institutions
Money market mutual funds
offer higher rates of interest than bank checking accounts and also offer check writing privileges
Which of the following is not true of Federal Reserve notes?
They are redeemable for gold.
Which of the following are included in the narrow definition of the money supply?
checkable deposits
Asymmetric information in financial markets exists when
borrowers know more about their ability to repay loans than lenders do
Net Worth on a bank's balance sheet is
sometimes called the owners' equity
A bank's assets include all but one of the following. Which one is the exception?
checkable deposits
If you know the required reserve ratio and the total value of a bank's assets, then you know how much the bank is holding in reserves.
If a bank has $6,000 in checkable deposits and the required reserve ratio is 0.2, then the bank can lend
No more than $4,899
Banks want to minimize their holdings of excess reserves because
excess reserves earn no interest
The immediate effect of a member bank's sale of U.S. government securities to the Fed is a(n)
increase in that bank's excess reserves
What essential factor enables commercial banks to create money?
excess reserves
If the required reserve ratio is 0.2, and the Fed buys $3,000 of U.S. government securities, the maximum amount by which the money supply can increase is
The actual money multiplier is smaller than the simple money multiplier because
cash withdrawals reduce the amount banks can lend out
Suppose the banking system has no excess reserves and required reserves equal to 20 percent of checkable deposits. If the Fed sells $10,000 in securities to Joe Bankustomer, what is the most that checkable deposits in the banking system fall? (Hint: Compare what the banking system might have done if it had loaned at every opportunity; also include the initial transaction with the Fed.)
Which of the following is not one of the procedures the Fed uses to change the money supply?
extending loans to the public
Increasing the required reserve ratio is
a contractionary policy because it lowers the amount of excess reserves in the banking system
To increase the money supply, the Fed might
decrease the reserve requirement and the discount rate
If the Fed buys U.S. government securities from a bank and credits the bank's reserve account,
the Fed's assets increase