Chapter 13 Flashcards
The concept of the liquidity trap was formulated by
John Maynard Keynes
Which is true?
M1 is not part of M2 is part of M3
People tend to hold more money as
The price level rises and credit availability falls
The opportunity cost of holding money
Varies directly with the interest rate
John Maynard Keynes said that people have three motives for holding money. Each of the following is a Keynesian motive except
Inflation
The S and L debacle will ultimately cost American taxpayers
About 200 billion
Which statement is true?
M2+large denomination time deposits =M3
The most narrow definition of the money stock developed by the Federal Reserve System in the U.S. is
M1
In the early 1980s the savings and loan associations started making —— loans and paying their shareholders —– interest rates.
Riskier and higher
Which is NOT considered money?
Credit Cards
The transaction motive for holding money
Are used to make expected expenditures
All large financial institutions have to hold a reserve of almost—–% of their demand deposits.
10
As interest rate declines the amount of money the public wishes to hold
Rises
The demand for money schedule shows that the quantity of money that people want to hold
falls as the interest rate rises
Coins in the hands of the public are
Included in both M1 and in M2
Back in the Middle Ages, the only safe place to put your money was
In goldsmiths safes
Which of the following is most unlike the others?
Passbook savings account
Banking began in
Medieval times
Each of the owing hurt the savings and loan industry in the 1980’s except
Falling interest rates
Which one of the following is not money?
Gold
Which statement is true?
Citigroup is the largest American bank.
What led to the bankruptcy of the many goldsmiths?
They had a reserve ratio that was too high.
If a person writes a check on a Tulsa bank to purchase a new Oldsmobile, he is employing money as:
A medium of exchange
Supposed goldsmith Banker had a certain number of gold coins in his safe and he kept writing more and more Goldsmith receipts for people who came in to borrow money. What would be happening to his reserve ratio
It would be failing.
