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Principles of Macroeconomics Study Set 8
Quiz 16: The Monetary System: Part A
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Question 21
Essay
Why is the Chairman of the Federal Reserve often referred to as the "second most powerful person in the United States?"
Question 22
Essay
Describe how the use of leverage affects the impact of bank investments.
Question 23
Essay
A bank has $30,000 in deposits and has $5,400 in reserves.What is its reserve ratio?
Question 24
Essay
When banks decide to increase their reserves, the money supply will _____ (holding all else constant).
Question 25
Essay
Suppose a bank purchases $50 of government securities using funds from reserves.How much do bank assets change as a result of this transaction?
Question 26
Essay
Describe the role of bank leverage in bank insolvency during times of falling asset prices.
Question 27
Essay
Monetary policy has an important influence on _____ and _____ in the short run.
Question 28
Essay
The fractional reserve characteristic of the banking system allows banks to create money and also create wealth from bank deposits.Describe why this statement is or is not true.
Question 29
Essay
The money multiplier is _____ when the reserve ratio is 12.5 percent.
Question 30
Essay
What is bank insolvancy?
Question 31
Essay
A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are $_____.
Question 32
Essay
Suppose the required reserve ratio is 20%.What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general,why might the actual amount of total money creation be less than the maximum?