Exam (elaborations)
ECO 4223 Final Exam Questions with 100% correct answers | verified | latest update 2024
ECO 4223 Final Exam Questions with 100% correct answers | verified | latest update 2024
[Show more]
Content preview
ECO 4223 Final ExamIf currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and
bank deposits equal $500 billion, then the money supply equals:
A. 150 billion
B. 650 Billion - ANS-A
In a system with fractional-reserve banking:
A. All banks must hold reserves equal to a fraction of their loans
B. All banks must hold reserves equal to a fraction of their deposits - ANS-B
In a 100% reserve banking system, if a customer deposits $100 currency into a bank, then the
money supply:
A. increases $100
B. remains the same - ANS-B
If the ratio of reserves to deposits (rr) increases, while the ratio of currency to deposits (cr) is
constant, and the monetary base (B) is constant, then:
A. The money supply increases
B. The money supply decreases - ANS-B
To reduce the money supply, the Fed:
A. buys government bonds
B. sells government bonds - ANS-B
When the Fed makes and open-market sale, it:
A. increases the monetary base
B. decreases the monetary base - ANS-B
To prevent banks from using excess reserves to make loans that would increase the money
supply, the Fed could conduct open-market _______ and ______ the interest rate paid on bank
reserves:
A. Sales; raise
B. purchases; lower - ANS-A
If the fed wishes to increase the money supply it should:
A. decrease the discount rate
B. increase the discount rate - ANS-A
Direct loans made to member banks by the Fed are called:
A. discount loans
B. federal funds loans - ANS-B
, The interest rate charged on loans by the Federal Reserve to banks is called:
A. Federal funds rate
B. Discount rate - ANS-B
If the monetary base fell and the currency-deposit ratio rose, but the reserve ratio remained the
same, then:
A. The money supply would fall but not by as much as it would have fallen if the reserve-deposit
ratio has risen
B. The money supply would fall but not by as much as it would have fallen if the reserve-deposit
ratio has fallen - ANS-A
The most frequently used tool for monetary policy:
A. open-market operations
B. changes in discount rate - ANS-A
When the Fed increases the interest rate, it pays banks on their reserves and:
A. the reserve-deposit ratio increases
B. the money supply increases - ANS-A
If many banks fail, this is likely to:
A. cause surviving banks to lower their ratios of reserves to deposits
B. cause surviving banks to raise their ratios to deposits - ANS-B
In a fractional- banking system, banks create money when they:
A. make loans
B. accept deposits - ANS-A
If there is no currency and the proceeds of all loans are deposited somewhere in the banking
system and if rr denotes the reserve-deposit ratio, then the total money supply is:
A. reserves divided by rr
B. reserves divided by (1-rr) - ANS-A
To increase the monetary base, the Fed can:
A. conduct open-market sales
B. conduct open-market purchases - ANS-B
If many banks fail, this is likely to:
A. decrease the ratio of currency to deposits
B. increase the ratio of currency to deposits - ANS-B
If the Fed increases the rate paid on reserves, banks will tend to hold ___ excess reserves,
which will _____ the money multiplier
A. more; increase
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller AnswersCOM. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £6.52. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
77254 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now