ECON 214 InQuizitive ch. 17 Liberty University Solution

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?

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.

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.

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 –.

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

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.

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.

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.

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.

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.