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
Some financial institutions are known as financial intermediaries because they serve as go-betweens that link
savers and borrowers
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 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 are included in the narrow definition of the money supply?
Asymmetric information in financial markets exists when
borrowers know more about their ability to repay loans than lenders do
A bank's assets include all but one of the following. Which one is the exception?
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
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
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