ECON 214 InQuizitive Assignment 10 solutions complete answers

ECON 214 InQuizitive Assignment 10 solutions complete answers 

 

Which of the following are functions of money?

 

Which of the following are responsibilities of the Federal Reserve?

 

Adjustments to the reserve requirement and the discount rate are less important than they used to be as tools used by the Fed to implement monetary policy.

 

Identify each attribute as being associated with fiat money, commodity-backed money, or both.

 

The ability to regulate commercial banks and monitor bank balance sheets is outside the Fed's authority. It is the duty of commercial banks to privately monitor their own activities.

 

If a country’s required reserve ratio is 8%, when the central bank puts $1,000 of new currency into circulation, by how much can the money supply grow assuming all currency is deposited in a bank and no banks hold excess reserves? Use the simple money multiplier.

 

Which of the following is true if you deposit $1,000 in a bank checking or savings account? Assume a 10% bank reserve requirement.

 

Fill in the blanks to complete the passage about a new variety of open market operations.

 

Most open market operations are – and are aimed at maintaining the economic status quo. During the –, however, – targeted open market operations were used to encourage economic growth. These actions were dubbed “–.” The first round of this practice focused primarily on the – market.

 

Fill in the blanks to complete the passage about discount loans.

 

Discount loans extended by the Federal Reserve Bank – normally an important factor in the macroeconomy. However, in crises discount loans are a safety net that reassures the –. It is in the economy’s best interest that the Fed serves as a regulator of banks because of the – nature of banking.

 

Money’s role as a store of value is less important today than it once was.

 

Consider this hypothetical balance sheet for YooHoo Bank, in the fictional country of Hellond.

 

After a sluggish quarter, the Federal Reserve Bank decides to increase the money supply in the economy. When the money-creation process is complete, the Fed wants there to be $20 billion worth of new funds in the money supply. If the required reserve ratio is 5%, what is the simple money multiplier, and by how much should the Fed initially increase the money supply? Assume that all currency is deposited in banks and that banks hold no excess reserves.

 

Click on the two quantities that must be equal for the financial statement to be balanced.

 

Fill in the blanks to complete the passage about discount borrowing.

 

Discount loans extended by the Federal Reserve – normally an important factor in the macroeconomy. The Fed used the discount rate to administer monetary policy actively until the –. During that time, the Fed would increase the discount rate to – borrowing by banks, or decrease the discount rate to – bank borrowing. Today, the Fed discourages discount borrowing unless banks are –.

 

Arrange the systems of economic exchange according to the order in which they historically appeared.

 

Match each term to the corresponding description.

 

In the United States, what amount of an individual’s deposit money is completely covered by the FDIC if the bank fails?

 

Drag each component of the M2 money supply into place in the figure.

 

What is the primary objective of open market operations by the Federal Reserve Bank?

 

Match each type of money to the corresponding definition.

 

If the Federal Reserve Bank wanted to set the money multiplier at mm = 12.5, what reserve ratio should it require? (Use the simple money multiplier for this calculation.)

 

Fill in the blanks to complete the passage about the business of banking.

 

The main function of – banks is to accept deposits and then to lend the same money (minus –) back out. Banks make a profit by charging a higher interest rate on – than the interest rate they pay on –. Through the loan process, banks are actually able to – money.

 

A bank has $320 million in deposits and is holding $39 million in reserves. If the required reserve ratio is 10%, what is the maximum new loan amount the bank can extend?

 

Which scenarios are examples of a double coincidence of wants?

 

Place each quantitative easing amount in the appropriate spot in the timeline.

 

Place the money supply measures in order of smallest to largest.

 

Drag each word to the appropriate blank, in order to complete the passage about barter- and money-based economies.

 

In barter economies, goods and services are – without the use of money. In order for a trade to occur, a – is required. With the introduction of –, trade becomes much easier: there is now a – between buyers and sellers.

 

Which of the following actions qualify as open market operations?

 

Fill in the blanks to complete the passage about one of the three key functions of money.

 

Because money creates a standard –, it is possible to compare the prices of two goods, which allows people to communicate the – of the goods in a way that is easily understood. This characteristic of money also enables it to serve as a – device, or a way to measure accounts and transactions in a consistent manner.

 

Match each term to the corresponding definition.

 

Fill in the blanks to complete the passage about the role of the FDIC.

 

The Federal – Corporation makes sure – get their money back if an insured bank fails. This agency was implemented during the – in response to the high number of bank failures. The peace of mind the FDIC provided depositors resulted in a decreased frequency of –. However, since banks and their customers are no longer fully exposed to risk, there is increased potential for –.

 

Which items are parts of the M1 money supply?

 

In the wake of the Great Recession, how did the amount of reserves held by banks change?

 

Suppose that inflation has started to creep upward, and the Fed wants to use open market operations to counteract this trend. Drag the correct items into place to depict the Fed’s actions.

 

What is the one tool the Federal Reserve Bank uses every day?

 

Calculate YooHoo Bank’s required reserve ratio, as a percentage. Round to the nearest percent if necessary.

 

Suppose the M2 money supply is $13 trillion, including:

$7 trillion in savings accounts
$3 trillion in checking accounts
$1 trillion in money market mutual funds
$1 trillion in certificates of deposit
$1 trillion in currency
What is the M1 money supply?

 

Anna has a yard full of chickens but needs milk for her baby. Josiah, who is allergic to eggs, has a cow that produces milk. Put the events in order to describe how Anna obtains milk by the barter method.

 

Place the events in order to describe how a bank with a temporary reserve shortfall uses a short-term loan to bring its reserves up to the required level.

 

Match the type of bank to its correct description.

 

Credit cards are included in the money supply.

 

For two people to successfully barter, there needs to be a double coincidence of wants. What does this mean?