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Questions and Answers
What is the impact of an open market purchase on bank reserves?
What is the impact of an open market purchase on bank reserves?
- It decreases the monetary base
- It increases bank reserves (correct)
- It decreases bank reserves
- It has no impact on bank reserves
What is the role of the Fed as the lender of last resort?
What is the role of the Fed as the lender of last resort?
- The Fed creates new money by making loans
- The Fed sets the required reserve ratio
- The Fed rarely changes the monetary base
- The Fed is ready to lend reserves to depository institutions that are short of reserves (correct)
What limits the quantity of deposits that banks can create?
What limits the quantity of deposits that banks can create?
- The required reserve ratio
- The monetary base
- Desired currency holding
- All of the above (correct)
What is included in the monetary base?
What is included in the monetary base?
What is the formula for the money multiplier?
What is the formula for the money multiplier?
If the currency drain ratio (C/D) is 0.4 and the desired reserve ratio (R/D) is 0.2, what is the money multiplier?
If the currency drain ratio (C/D) is 0.4 and the desired reserve ratio (R/D) is 0.2, what is the money multiplier?
In the given example, how much does the bank keep as reserves when deposits increase by $80,000? (C/D = 0.5, R/D = 0.1)
In the given example, how much does the bank keep as reserves when deposits increase by $80,000? (C/D = 0.5, R/D = 0.1)
What is the main difference between M1 and M2 in the United States?
What is the main difference between M1 and M2 in the United States?
Why are some saving deposits in M2 not considered money?
Why are some saving deposits in M2 not considered money?
Which of the following is a component of both M1 and M2?
Which of the following is a component of both M1 and M2?
What is the significance of the items in M1?
What is the significance of the items in M1?
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