Econ Chap 14

Question 1

The Fed job

Answer 1

is to regulate the money supply

Question 2

Money

Answer 2

widely accepted means of payment “something that serves as a medium of exchange, a unit of accounting, and a store of value”

Question 3

Liquid asset

Answer 3

an asset that can be used for payment quickly

Question 4

Federal Funds Rate

Answer 4

the overnight lending-rate from one major bank to another

Question 5

Illiquid assets

Answer 5

assets that cannot be quickly converted into cash

Question 6

Systematic risk

Answer 6

risk that the whole system is going to crash

Question 7

The monetary base (MB)

Answer 7

Currency and total reserves held at the Fed

Question 8

M1

Answer 8

currency plus checkable deposits

Question 9

M2

Answer 9

M1 savings deposits, money market mutual

Question 10

Fractional Reserve

Answer 10

banking a system in which banks hold only a fraction of their deposits in reserve

Question 11

Reserve Ration

Answer 11

the ratio of reserves to deposits

Question 12

Money Multipler

Answer 12

the amount that the money supply expands with each dollar interest

Question 13

Reserve Requirement

Answer 13

decreases the increase in money supply, increases the decrease in money supply

Question 14

discount rate

Answer 14

decreases the increase in money supply, increases the decrease in money supply

Question 15

Open Market Operations

Answer 15

Buy the increase in money supply, sells the decrease in money supply