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Suppose the required reserve ratio is 20%.What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general,why might the actual amount of total money creation be less than the maximum?

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The money multiplier is the reciprocal o...

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Suppose that in a country the total holdings of banks were as follows: required reserves = $45 million excess reserves = $15 million deposits = $750 million loans = $600 million Treasury bonds = $90 million Show that the balance sheet balances if these are the only assets and liabilities. Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 2%, banks still want to hold the same percentage of excess reserves, and banks don’t change their holdings of Treasury bonds? How much does the money supply change by?

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The only liability is deposits which equ...

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What does the "double coincidence of wants" refer to?

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“Double coincidence of wants” refers to ...

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One of the features of money is its store of value.However,most people do not hold their wealth as currency.Given that currency is the most liquid type of asset,why don't people hold all their wealth as currency?

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Currency is not a perfect store of value...

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Suppose a bank has $3,000 in reserves,$25,000 of deposits,and a 10 percent reserve requirement.What is the amount of excess reserves?

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What does it mean for the Fed to be the "lender of last resort?"

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When banks can not borrow in the market ...

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Describe how the use of leverage affects the impact of bank investments.

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Leverage amplifies the impact from chang...

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The Fed began paying interest on reserves in October 2008.Holding all else constant,what effect would this have on the money supply?

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This would...

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How are Federal Reserve Board Governors selected?

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The Fed Governors are appointed by the p...

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Monetary policy has an important influence on _____ and _____ in the short run.

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inflation,...

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List two examples of commodity money.

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Commodity money refers to mone...

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In many circumstances,prisoners are not allowed to possess cash.Does this mean there is no money in prison? Explain.

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No.
Any good that provides the three fun...

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When the Fed purchases government bonds the money supply _____ and the federal funds rate _____.

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increases,...

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List the two main functions performed by the Fed?

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The Fed performs two main func...

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Monetary policy is made by the ______.

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Federal Op...

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What is bank insolvancy?

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Bank insolvancy is when bank c...

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What are the functions of money?

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Medium of exchange, ...

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Which of the three functions of money are commonly met by each of the following assets in the U.S.economy? a.paper dollar b.precious metals c.collectibles such as baseball cards,stamps,and antiques

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a.medium of exchange...

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You believe the dollars you have today will be accepted in the future in exchange for goods and services.Which function of money does this illustrate?

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What is the change in the money supply when the Fed purchases $100 worth of bonds in a 100-percent-reserve banking system?

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