ECON 102 Lecture Notes - Lecture 20: Demand Deposit, Time Deposit, Debit Card

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ECON 102 Lecture 19: Econ 102 Lecture 19 Money and Banking con’t (1)

ECON 102 Lecture Notes - Lecture 20: Demand Deposit, Time Deposit, Debit Card

ECON 102 Lecture Notes - Lecture 24: 5, Value Engineering, Flowchart

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Econ 102 lecture 20 money and banking con"t: money supply. Money supply = currency (cash) + ?bank? deposits: kinds of deposits i. Demand deposit: withdraw on demand, i. e. no notice, low interest ii. Savings deposit: notice of withdrawal required, higher interest iii. Term deposit: nowadays, easy to transfer funds from all accounts, today, term deposits distinguish notice accounts that pay higher term interest (interest reduced in withdrawn early, definitions of the money supply. H = high powered = cash in public c + cash in reserve r i: m1 = currency in circulation + demand deposits at chartered. Note: m2"s - used by boc to control inflation: near money and money substitutes i. ii. iii. If medium of exchange function important, then m1b. If store of wealth important, use deposits that pay higher returns but are not chequable, e. g. m2 or m2+ or m2++

Related Questions

I need to consider an economy with five assets: 1) Cash 2) Checking Accounts 3) Savings and Money-Market Accounts 4) Bonds 5) Stocks. M1 includes asset classes 1 and 2, and M2 is the sum of M1 and asset class 3. All else being equal, how would each of the following changes affect demand for M1? And for M2? Explain.

(a)The stock market crashes, and investors who were previously excited about prospective gains now view it as too risky.

(b)Authorities intensify the fight against street crime, leading to more arrests and convictions for robbery. As crime rates fall, people feel safer holding cash.

(c)Banks introduce overdraft protection, under which funds are automatically transferred from savings to checking as needed to cover checks.

(d)Due to an increase in inflation expectations, the average interest rate on bonds rises from 3% to 6%.

(e)The government introduces deposit insurance, guaranteeing checking and savings deposits in the event that there are depositor runs and banks fails.

taupeferret828

Consider an economy with five assets: 1) Cash 2) Checking Accounts 3) Savings and Money-Market Accounts 4) Bonds 5) Stocks. M1 includes asset classes 1 and 2, and M2 is the sum of M1 and asset class 3. All else being equal, how would each of the following changes affect demand for M1? And for M2? Explain.

(a) The stock market crashes, and investors who were previously excited about prospective gains now view it as too risky.

(b) Authorities intensify the fight against street crime, leading to more arrests and convictions for robbery. As crime rates fall, people feel safer holding cash.

(c) Banks introduce overdraft protection, under which funds are automatically transferred from savings to checking as needed to cover checks.

(d) Due to an increase in inflation expectations, the average interest rate on bonds rises from 3% to 6%.

(e) The government introduces deposit insurance, guaranteeing checking, and savings deposits in the event that there are depositor runs and banks fail.

limeox674

1. Which of the following both increase the money supply?

an increase in the discount rate and an increase in the interest rate on reserves
an increase in the discount rate and a decrease in the interest rate on reserves
a decrease in the discount rate and an increase in the interest rate on reserves
a decrease in the discount rate and a decrease in the interest rate on reserves

2. In the U.S., the average adult holds about $3,700 in

currency.
wealth.
M1.
M2.

3. The measure of the money stock called M1 includes

wealth held by people in their checking accounts.
wealth held by people in their savings accounts.
wealth held by people in money market mutual funds.
everything that is included in M2 plus some additional items

4. When the Fed decreases the discount rate, banks will

5. Reserve requirements are regulations concerning

the amount banks are allowed to borrow from the Fed.
the amount of reserves banks must hold against deposits.
reserves banks must hold based on the number and type of loans they make.
the interest rate at which banks can borrow from the Fed.

6. When we say that trade is roundabout we mean that

people sometimes trade goods for goods.
trades require a double coincidence of wants.
currency is accepted primarily to make further trades.
people must spend time searching for the products they wish to purchase.

7. Values of Assets

Asset	Amount in $Billions
Small-time deposits	780
Large time deposits	1,700
Demand deposits	450
Other checkable deposits	370
Savings deposits	4950
Traveller's checks	5
Money market mutual funds	740
Currency	880
Miscellaneous categories of M2	50

Refer to Value of Assets. What is the value of M1 in billions of dollars?

1705
2485
6295
7075

8. In 1991, the Federal Reserve lowered the reserve requirement from 12 per cent to 10 per cent. Other things the same this should have

increased both the money multiplier and the money supply.
decreased both the money multiplier and the money supply.
increased the money multiplier and decreased the money supply.
decreased the money multiplier and increased the money supply.

9. Consider four survivors on an island.

Rupert	has machete	wants fishing spear
Amber	has cooking pot	wants fishing spear
Rob	has fishing spear	wants machete
Tom	has cooking pot	wants machete

Which of the following pairs of survivors has a double-coincidence of wants?

Rupert with Amber, and Rob with Tom
Amber with Tom
Rupert with Rob
None of the above is correct.

10. Economists use the term money to refer to

all wealth.
all assets, including real assets and financial assets.
all financial assets, but not real assets.
those types of wealth that are regularly accepted by sellers in exchange for goods and services.

crimsongrasshopper834

ECON 102 Lecture Notes - Lecture 20: Demand Deposit, Time Deposit, Debit Card

ECON 102 Lecture 19: Econ 102 Lecture 19 Money and Banking con’t (1)

ECON 102 Lecture Notes - Lecture 20: Demand Deposit, Time Deposit, Debit Card

ECON 102 Lecture Notes - Lecture 24: 5, Value Engineering, Flowchart

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