12 Questions
What is the primary function of money in the economy?
To act as a medium of exchange
Which of the following is NOT a measure of the money supply?
M4
What is the most liquid measure of the money supply?
M1
What is the term for the amount of money in circulation?
Money Supply
Who oversees the Federal Reserve?
The 7-member Board of Governors
What is the term for the ability to convert an asset into cash quickly and without loss of value?
Liquidity
What is the main function of the 12 Federal Reserve District Banks scattered throughout the United States?
To hold reserves for Depository Institutions
What is the term for the minimum amount of funds that depository institutions must hold in the form of vault cash or deposits with the Fed?
Required Reserves
What is the result of a bank lending out excess reserves, and the borrower re-depositing the funds into the bank?
The bank can lend out more excess reserves
What is the formula to calculate the Required Reserves (RR)?
RR = rrr * TD
What is the term for the number that, when multiplied by a change in reserves in the banking system, yields the resulting change in the money supply?
Money Multiplier
What happens to the money multiplier when the Required Reserve Ratio (rrr) increases?
The money multiplier decreases
Understand the concept of money and its functions, including medium of exchange, unit of account, and store of value. Learn about the money supply and its importance in economics.
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