ECON 201 Chapter Notes - Chapter 14: Bank Reserves, Commodity Money, Savings Account

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coralguinea-pig936

11 Oct 2018

School

Department

Economics

Course

ECON 201

Professor

Dennis O'Dea

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Document Summary

Chapter 14 money, banking, and the federal reserve. Money: any asset that can easily be used to purchase goods and services. Currency in circulation: actual cash in the hands of the public. Checkable bank deposits: bank accounts o which people can write checks. Money supply: the total value of financial assets in the economy that are considered money. Narrower definition considers only the most liquid assets to be money: currency in circulation, traveler"s checks, and checkable bank deposits. Broader: savings account deposits that can easily be converted to checking. Double coincidence of wants: in a barter system, two parties can trade only when each wants what the other has to offer. Medium of exchange: an asset that individuals acquire for the purpose of trading rather than for their own consumption. Store of value: a means of holding purchasing power over time. Unit of account: a measure used to set prices and make economic calculations.

Related Questions

Which of the following is NOT a tool the Fed uses to manage the money supply? A) open market operations B) discount policy C) deposit insurance D) reserve requirements 0.4 points Question 2 The problem with barter economies is that they require A) less time and trouble to trade as compared with a money economy. B) that there be a double coincidence of wants. C) a banking system for trade to occur. D) that there be a single coincidence of wants. 0.4 points Question 3 If banks do not loan out all their excess reserves then the real world multiplier is A) smaller than 1/RR. B) larger than 1/RR. C) equal to 1/RR. D) not related to 1/RR. 0.4 points Question 4 If the Federal Open Market Committee wants to increase the money supply through open market operations it will A) buy U.S. Treasury Securities. B) sell U.S. Treasury Securities. C) increase the discount rate. D) decrease the discount rate. 0.4 points Question 5 M1 includes A) currency in circulation, checking account balances at banks, the value of traveler's checks. B) currency in circulation, savings accounts, checking account balances at banks. C) currency in circulation, savings accounts, checking account balances at banks, traveler's D) coins, savings account balances at banks, traveler's checks. 0.4 points Question 6 Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be A) 19 percent. B) 15 percent. C) 11 percent. D) 6 percent. 0.4 points Question 7 According to the quantity theory of money, the inflation rate equals A) the money supply minus real output. B) real output minus the money supply. C) the growth rate of the money supply minus the growth rate of real output. D) the growth rate of real output minus the growth rate of the money supply 0.4 points Question 8 Suppose that you sold a basketball ticket for the SEC tournament for $750. Assuming that you deposit the entire $750 in your bank and that the RR = 10%, Answer the following questions while also using the same assumptions in book/lecture slide. Correct answers contain no decimals. Please report them as they are. a) What is the total change in checking account deposits? Total change in checking account deposits is Blank 1 . b) How much new money is created? (or what is the change in money supply given the above state conditions?) Total change in money supply is Blank 2 . c) The amount of new money created in this example would be higher or lower than in the real world. The amount of money created this way would be Blank 3 than in the real world.

pucecamel584

1. Which of the following is NOT a tool the Fed uses to manage the money supply?

A) open market operations

B) discount policy

C) deposit insurance

D) reserve requirements 0.4 points

2. The problem with barter economies is:

A) less time and trouble to trade as compared with a money economy.

B) that there may be a double coincidence of wants.

C) a banking system for trade to occur.

D) that there be a single coincidence of wants.

3. If banks do not loan out all their excess reserves, then the real world multiplier is

A) smaller than 1/RR.

B) larger than 1/RR.

C) equal to 1/RR.

D) not related to 1/RR.

4. If the Federal Open Market Committee wants to increase the money supply through open market operations, it will

A) buy U.S. Treasury Securities.

B) sell U.S. Treasury Securities.

C) increase the discount rate.

D) decrease the discount rate.

5. M1 includes

A) currency in circulation, checking account balances at banks, the value of traveler's checks.

B) currency in circulation, savings accounts, checking account balances at banks.

C) currency in circulation, savings accounts, checking account balances at banks, travelers.

D) coins, savings account balances at banks, traveler's checks.

6. Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be

A) 19 percent.

B) 15 percent.

C) 11 percent.

D) 6 percent.

7. According to the quantity theory of money, the inflation rate equals

A) the money supply minus real output.

B) real output minus the money supply.

C) the growth rate of the money supply minus the growth rate of real output.

D) the growth rate of real output minus the growth rate of the money supply.

8. Suppose that you sold a basketball ticket for the SEC tournament for $750. Assuming that you deposit the entire $750 in your bank and that the RR = 10%, Answer the following questions while also using the same assumptions in the book/lecture slide. Correct answers contain no decimals. Please report them as they are.

a) What is the total change in checking account deposits?

b) How much new money is created? (or what is the change in money supply given the above state conditions?) The total change in the money supply is Blank 2.

c) The amount of new money created in this example would be higher or lower than in the real world. The amount of money created this way would be Bank 3 than in the real world.

orangegnu991

QUESTION 1

Refer to this scenario for all of the questions on this problem set.

BALANCE SHEET OF A MONOPOLY BANK

ASSETS

LIABILITIES AND

CAPITAL

Reserves: 500

Loans and Securities: 4,500

Other Assets: 1,000

Total Assets 6,000

Checkable Deposits: 5,000

Capital: 1,000

Total Liabilities & Capital 6,000

The balance sheet of the only bank in a simple economy is shown below. The reserve requirement is 10%. If cash in the hands of the non-bank public is $3,000, the Money Supply = ___________________.

QUESTION 2

BALANCE SHEET OF A MONOPOLY BANK

ASSETS

LIABILITIES AND

CAPITAL

Reserves: 500

Loans and Securities: 4,500

Other Assets: 1,000

Total Assets 6,000

Checkable Deposits: 5,000

Capital: 1,000

Total Liabilities & Capital 6,000

Suppose people deposit $1,000 of their cash into checking accounts. In the balance sheet below, enter the new totals in all of the accounts, immediately following the transaction, before the bank does any new lending.

ASSETS

LIABILITIES

AND CAPITAL

Reserves:

Loans and Securities:

Other Assets: 1,000

Total Assets:

Checkable Deposits

Capital

Total Liabilities and Capital:

QUESTION 3

Recall that cash in the hands of the non-bank public was initially equal to $3,000. Thus, immediately following the $1,000 deposit, currency in the hands of the non-bank public = _____________

QUESTION 4

And Deposits = ______________

orangehippopotamus843

ECON 201 Chapter Notes - Chapter 14: Bank Reserves, Commodity Money, Savings Account

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