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Exam 29: The Monetary System

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Question 91

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The series of bank failures in 1907 occurred despite the creation of the Federal Reserve many years earlier.

A) True
B) False

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Question 92

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Discuss why the Fed rarely changes the reserve requirements.

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There are two main reasons the Fed does ...

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Question 93

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Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

The money multiplier is higher when bankers are more cautious and hold excess reserves.

If a bank with a required reserve ratio of 15 percent receives a deposit of $600, it now has a

Compare the Board of Governors and the Federal Open Market Committee.

Which government body is primarily responsible for regulating banks and ensuring the health of the banking system?

When the federal funds rate is below the target rate, the Fed will _____ bonds. This action will _____ the money supply.

The measure of the money stock called M1 includes

What does the text mean by the question, "Where Is All the Currency?" How does it answer the question?

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have available to lend out if it decides to hold only required reserves?

Members of the Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Which list ranks assets from least to most liquid?

Table 29-4 ​ -Refer to Table 29-4. Assume there is a reserve requirement and the Bank of Cheerton is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

When banks decide to increase their reserves, the money supply will _____ (holding all else constant).

The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements.

​Under a fractional-reserve banking system, the money supply cannot change without any action from the Federal Reserve.

Scenario 29-1 The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Tazian dollar. Aggregate banking statistics show that collectively the banks of Tazi hold $375 million of required reserves, $225 million of excess reserves, have issued $7,500 million of deposits, and hold $750 million of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. -Refer to Scenario 29-1. Suppose the Bank of Tazi loaned the banks of Tazi $30 million. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?

Are credit cards and debit cards money? What's the difference between credit and debit cards?