ECN 204 Lecture Notes - Lecture 12: Fractional-Reserve Banking, Credit Union, Financial Intermediary

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emeraldtermite859

14 Dec 2016

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Medium of exchange: money can be used for selling and buying goods and services. Measure of value: prices quoted in dollars and cents a (cid:498)unit of account(cid:499) Store of value: money allows the transfer of purchasing power from the. It is the most liquid of all assets and a convenient way to store wealth. Currency in circulation: coins + paper money token money. Chartered banks are the primary depository institutions. Currency held by the bank of canada and chartered banks is excluded from m1 and other measures of the money supply. Also excluded from the money supply are any deposits of the federal government or the bank of canada that are held by chartered banks. Near monies are highly liquid financial assets that do not directly function as a medium of exchange but can be readily converted into currency. Figure 12-1 components of money supply m 1, m 2, m 2+ , and m2++ in canada.

Related Questions

Question 9

In which of the following situations would money function as a store of value?

a. The wife checks the balance in the family savings account

b. In all of the above

c. The husband checks the prices at the local market

d. You take out a loan at the local bank

Question 10

M2 money is?

a. All demand deposits plus all currency and coin in circulations

b. M3 money plus all the currency and coin in the circulation

c. M1 plus near money

d. M3 plus near money

Question 11

Of all the parameters that influence effective demand, the most unstable overtime is?

a. Government Expenditure

b. Investment

c. Savings

d. Consumption

Question 12

People hold money?

a. to have money to take advantage of economic opportunities as they arise

b. to have money for purchases in between receipts of income

c. for all of the above purposes

d. to have money in case of unforseen emergencies

Question 13

The choice between near money and money is?

a. Near Money is not directly spendable, whereas money is directly spendable

b. Near money is fiat money, whereas money is not

c. None of the above

d. Near money consist of all deposits in commercial and saving banks, whereas money does not include deposits

Question 14

The largest single component in terms of total value in M1 money supply is?

Select one:

a. Coin

b. saving deposits

c. Demand deposits

d. Currency

salmonyak756

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

1. The market in which loans are bought and sold is called the:

		loan market.
		money market.
		secondary loan market.
		primary loan market.

2. Which of the following is omitted in a barter transaction?

		trade
		medium of exchange
		store of value
		money

3. If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied.

		balance of trade
		double coincidence of wants
		convenience of exchange
		division of labour

4. If loans become far less available, then sectors of the economy that ______________ like business investment, home construction, and car manufacturing can be dealt a crushing blow.

		depend on borrowed money
		typically generate extraordinary gains
		make loans to financial capital markets
		failed to diversify risk

5. Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at the market value of $400 million, what will its total assets equal?

		$110 million
		$710 million
		$480 million
		$510 million

6. Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?

		medium of exchange
		unit of account
		store of value
		unit of exchange

7.Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?

		savings
		money
		M2
		M1

8. Which of the following institutions determines the quantity of money in the economy as its most important task?

		U.S. Department of the Treasury
		Federal Open Market Committee
		Central Bank
		Federal Reserve Board of Governors

9. How are the specific interest rates for the lending and borrowing markets determined?

		U.S. Treasury Department Board policy
		by the forces of supply and demand
		through open market operations
		by altering the discount rate

10.When the central bank lowers the reserve requirement on deposits:

		the money supply increases and interest rates decrease.
		the money supply and interest rates decrease.
		the money supply and interest rates increase.
		the money supply decreases and interest rates increase.

taupeant891

ECN 204 Lecture Notes - Lecture 12: Fractional-Reserve Banking, Credit Union, Financial Intermediary

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