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ECN 204 Chapter 14: Chapter 14 ECN 204

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blackmammoth766
8 Feb 2017
School
Ryerson University
Department
Economics
Course
ECN 204
Professor
Leo Michelis

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Document Summary

Medium of exchange: items seller generally accept and buyers generally use to pay for a good or service. Measure of value: measures value of money. Stores of value: able to use in stores to buy good/services. Liquidity: the ease with which an asset can be converted to cash with little or no loss of purchasing power. Currency: coins and paper money: token money, bank of canada notes. Demand deposits: chequing account deposits in chartered banks: money m1+= currency in circulation + demand deposits. M2: deposits at trust and mortgage loan companies, deposits at caisses populaires, credit unions and other non-bank deposit taking institutions money market mutual funds. M2+: m2++ is m2 plus canadian saving bonds and non-money market mutual funds. In canada all money consists essentially of the debts of the government and charted banks. These debts efficiently perform the functions of money so long as their value, or purchasing power, is relatively stable.

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Related Questions

INTRO - MACROECONOMICS - Money & Banking - & The Money Market and Monetary Policy

Answer the questions below from the data in the table (all figures are in billions of dollars).

Total currency issued by the Bank of Canada $17
Total personal savings deposits 186
Total demand deposits 19
Deposits of government at the Bank of Canada 3
Currency held by commercial banks 3
Government bonds owned by the public 96
Nonpersonal term deposits (certificates of deposit) 41


a. Total currency in circulation is $ _____ billion.

b. How much larger is M1 than the total currency in circulation?

M1 is larger than the total currency by $ _____ billion.

c. How much larger is M2 than M1?

M2 is larger than M1 by $ _____ billion.

Please provide an explanation as you solve this question.

d. How much larger is M3 than M2?

M3 is larger than M2 by $ _____billion.

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.

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.