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Principles of Macroeconomics Study Set 8
Quiz 16: The Monetary System: Part A
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Question 41
Essay
Describe the role of the Federal Deposit Insurance Corporation (FDIC).
Question 42
Essay
When the federal funds rate is below the target rate, the Fed will _____ bonds. This action will _____ the money supply
Question 43
Essay
Suppose that in a country the total holdings of banks were as follows: required reserves = $45 million excess reserves = $15 million deposits = $750 million loans = $600 million Treasury bonds = $90 million Show that the balance sheet balances if these are the only assets and liabilities. Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 2%, banks still want to hold the same percentage of excess reserves, and banks don’t change their holdings of Treasury bonds? How much does the money supply change by?
Question 44
Essay
Which of the three functions of money are commonly met by each of the following assets in the U.S.economy? a.paper dollar b.precious metals c.collectibles such as baseball cards,stamps,and antiques
Question 45
Essay
The _____ is the interest rate at which banks make overnight loans to other banks.
Question 46
Essay
Are credit cards and debit cards money? What's the difference between credit and debit cards?
Question 47
Essay
Economists argue that the move from barter to money increased trade and production.How is this possible?
Question 48
Essay
What is meant by the term "lender of last resort?" In what circumstances might the Fed be a lender of last resort?
Question 49
Essay
Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?