ECON 2 Chapter Notes - Chapter 29: Federal Open Market Committee, Fractional-Reserve Banking, Transaction Account

157 views8 pages

blushsquirrel508

2 Aug 2018

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

How does the federal reserve control the money supply: what money is and why it is important another) Without money trade would require barter (the exchange of one good/service for. Every transaction would require a double coincidence of wants - the unlikely. Most people would have to spend time searching for others to trade with (a huge occurrence that 2 people each have a good the other wants waste of resources) This searching is unnecessary with money : the set of assets that people regularly use to buy goods/services from other people. Medium of exchange : an item buyers give to sellers when they want to purchase. Unit of account : the yardstick people use to post prices and record debts. Store of value : an item people can use to transfer purchasing power from the present. Commodity money : takes the form of a commodity with intrinsic value.

Related Questions

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

What are the requirements for something to be considered money? Why does the dollar have value?
What does the money supply consist of and what are the respective amounts in the total money supply for the United States?
What are the primary functions of the Fed? What role does the Federal Open Market Committee (FOMC) play in our economy?
What role do the financial institutions (commercial banks and other institutions) play in our financial system?
What is meant by the term “fractional-reserve banking” in our system? What are the implications for consumers?
What are the tools available to the FED for controlling the money supply? Which are used most often? Which are most effective?
How does the money multiplier help to determine the effects of monetary policy?
What are the pros and cons of using monetary policy, as opposed to the use of fiscal policy, for implementing economic policies and practices?

grayllama547

What are the requirements for something to be considered money? Why does the dollar have value?
What does the money supply consist of and what are the respective amounts in the total money supply for the United States?
What are the primary functions of the Fed? What role does the Federal Open Market Committee (FOMC) play in our economy?
What role do the financial institutions (commercial banks and other institutions) play in our financial system?
What is meant by the term “fractional-reserve banking” in our system? What are the implications for consumers?
What are the tools available to the FED for controlling the money supply? Which are used most often? Which are most effective?
How does the money multiplier help to determine the effects of monetary policy?
What are the pros and cons of using monetary policy, as opposed to the use of fiscal policy, for implementing economic policies and practices?

grayllama547

ECON 2 Chapter Notes - Chapter 29: Federal Open Market Committee, Fractional-Reserve Banking, Transaction Account

Document Summary

Get access

Related Documents

ECON 2 Lecture Notes - Lecture 10: Federal Open Market Committee, Frictional Unemployment, Efficiency Wage

ECON 2 Chapter Notes - Chapter 29: Credit Crunch, Capital Requirement, Open Market Operation

ECON 2 Lecture Notes - Lecture 10: Federal Open Market Committee, Fractional-Reserve Banking, Monetary Policy

Related Questions