Chapter 13 Flashcards
Which one of the following is not money?
Gold
People tend to hold more money as
the price level rises and credit availability falls.
As the interest rate declines the amount of money the public wishes to hold
rises.
Back in the Middle Ages, the only safe place to put your money was
in goldsmiths’ safes.
All large financial institutions have to hold a reserve of almost ___% of their demand deposits.
10
Which one of the following is not part of our money supply?
Gold
Which statement is true?
M2 + large denomination time deposits = M3.
Banking began in
medieval times.
What led to the bankruptcy of many goldsmiths?
They had a reserve ratio that was too low.
John Maynard Keynes said that people have three motives for holding money. Each of the following is a Keynesian motive except
inflation.
In the early 1980s the savings and loan associations started making _____ loans and paying their shareholders _____ interest rates.
riskier; higher
Suppose a goldsmith (banker) had a certain number of gold coins in his safe and he kept writing more and more goldsmiths’ receipts for people who came to him to borrow money. What would be happening to his reserve ratio?
It would be falling.
Each of the following hurt the savings and loan industry in the 1980s except
falling interest rates.
The S & L debacle will ultimately cost American taxpayers
about $200 billion.
Which is true?
M1 is part of M2, and M2 is part of M3.
