Economics 1500

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Economics 1500
2010-07-15 16:35:21

Chapter 11
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  1. The financial sector of an economy
    transfers savings back into spending
  2. If the reserve ratio is .08, the simple money multiplier is
  3. Short term interest rates and long term interest rates are determined in the ___ and ___ respectively
    money market, loanable funds market
  4. If the required reserve ratio is .10 and individuals hold no cash, a new cash deposit of 2 million will increase the money supply a total of
    20 million
  5. Total reserve 100,000
    demand deposit 100,000

    Assuming the reserve ratio is 10 percent and that the bank does not want to hold excess reserves. What will the bank's loans at the end of the money creation process?
  6. Which of the followin is not one of the functions of money?
    standard of economic well-being
  7. when a cashier gives you a pair of jeans for your 20 bill, money is serving which function
    medium of exchange
  8. As the reserve ratio goes up, the simple money multiplier goes
    down, and less money will be created
  9. If the required reserve ratio is .20 and individuals hold no cash, a 5 million new cash deposit in the banking system will increase the money supply by a total amount of
    25 mil
  10. Suppose required reserve ratio is .15 and individuals hold no cash. Total bank deposits are 100 mil and the bank holds 20 mil in reserves. How much additional money can the bank create if it does not hold excess reserves?
    33 mil
  11. The measure of money most cloesly correlated with the price level and economic activity is
  12. total reserves 800,000
    demand deposit 800,000

    if the reserve ratio is 5 percent, this bank is in a position to make a maximum new loan of
  13. Non liquid assets are able to perform which of the following functions
    store of value
  14. the required reserve ratio refers to the ratio of a banks
    required reserves to its deposits
  15. when banks offer checking accounts they are issuing a
    financial asset that functions as money
  16. A single bank has reserve requirement of 10 percent. If a customer deposits 100 mil the bank may lend how much of this deposit?
    90 mil
  17. Small denomination time deposits are included in
  18. total reserve 800,000
    demand deposit 800,000

    If the reserve ratio is 5 percen how much does this bank have in excess reserve
  19. total reserve 100,000
    demand deposit 100,000

    Assuming the reserve ratio is 10 percent what will be the banks required reserves at the end of the money creation process?
  20. Total reserves 100,000
    demand deposits 100,000

    Assuming the reserve ratio is 10 percent, what will be the bank's excess reserves at the end of the money creation process
  21. real sector
    the market for the production and exchange of goods and services
  22. interest rates
    the prices paid for the use of financial asset
  23. money
    highly liquid financial asset thats generally accepted in exchange for other goods, is used as a reference in valuing other goods and can be stored as wealth
  24. Functions of money
    • 1. serves as a medium of exchange
    • 2. serves as a unit of account
    • 3. serves as a store of wealth
  25. m1
    the component of the money supply that consists of currency in the hands of public plus checking accounts and traveler's checks
  26. m2
    m1 plus savings, small denomination time deposits, and money market mutual fund shares
  27. asset management
    how a bank handles its loans and other assets
  28. liability management
    how a bank attracts deposits and what it pays for them
  29. reserves
    currency and deposits a bank keeps on hand or at the Fed or central bank, to manage the normal cash inflows and outflows
  30. reserve ratio
    ratio of reserves to total deposits
  31. amount of demand deposits that will ultimately exist
    • 1/reserve ratio = a
    • a x initial amount = ultimately exist
    • ultimately exist - initial amount = money created in the process
  32. simple money multiplier
    measure of amount of meony ultimately created per dollar deposited in the banking system, when people hold no currency 1/r
  33. excess reserves
    reserves held by banks in excess of what banks are required to hold
  34. money multiplier
    • (1+c)/(r+c)
    • where r is the percentage of deposits banks hold in reserve and c is the ratio of money people hold in currency to the money they hold as deposits