Lecture 5 stuff to work on Flashcards
1
Q
What does selling bonds do to the money supply?
A
It decreases the money supply
2
Q
What does buying bonds do to the money supply?
A
It increases the money supply
3
Q
What does increasing the reserve requirements do to the money supply?
A
It decreases the money supply
4
Q
What does decreasing the reserve requirement do to the money supply?
A
it increases the money supply
5
Q
What is the fractional reserve banking system?
A
This is a system where banks hold a fraction of their deposits as reserves and lend out the rest
6
Q
What are liabilities?
A
a bank’s deposits
7
Q
What are assets?
A
A bank’s reserve plus loans issued
8
Q
What is the money multiplier?
A
1/ORR
