Which of the following is not included in either M1 or M2?
answer
U.S. Treasury bills
question
In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then
answer
M1 would not change.
question
If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new
deposit of $500,
answer
its required reserves increase by $40.
question
If the reserve ratio is 10 percent, the money multiplier is
answer
10
question
When the Fed conducts open-market purchases,
answer
it buys Treasury securities, which increases the money supply.
question
When the Fed conducts open-market sales,
answer
it sells Treasury securities, which decreases the money supply.
question
The Fed's primary tool to change the money supply is
answer
conducting open market operations.
question
If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money
supply?
answer
it increases by $150,000
question
The interest rate that the Fed charges banks that borrow reserves from it is the
answer
discount rate.
question
When the Fed decreases the discount rate, banks will
answer
borrow more from the Fed and lend more to the public. The money supply increases.
question
A problem that the Fed faces when it attempts to control the money supply is that
answer
since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers.
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