Money & Monetary Policy

Question 1

Money

Answer 1

Money is anything that is generally accepted as a way of paying for goods and services

Question 2

Token money

Answer 2

Is money whose face value is greater than its intrinsic value

Question 3

Money supply

Answer 3

Is the quantity of money available in the economy

Question 4

Monetary policy

Answer 4

Is control over the money supply

Question 5

Central bank

Answer 5

Of a country conducts the monetary policy

Question 6

To control the money supply …

Answer 6

The European Central Bank uses open-market operations
, the purchase and sale of government bonds

Question 7

Reserves (R)

Answer 7

The portion of deposits that banks have not lent

Question 8

A bank’s liabilities include …

Answer 8

Deposits; assets include reserves and outstanding loans

Question 9

100-percent-reserve banking

Answer 9

A system in which banks hold all deposits as reserves

Question 10

Fractional-reserve banking

Answer 10

A system in which banks hold a fraction of their deposits as reserves

Question 11

Monetary policy (def)

Answer 11

Is the actions of a central bank that determines the size and rate of growth of the money supply

Question 12

Liquid asset

Answer 12

Is an asset that can be converted into cash quickly

Question 13

Yield

Answer 13

Is the income return on an investment, such as the interest or dividends received from holding a particular security

Question 14

Financial intermediaries

Answer 14

An entity that acts as the middleman between two parties in a financial transaction e.g commercial bank

Question 15

Required reserve ratio

Answer 15

Is the ratio of reserves to deposits that banks are required, by regulation, to hold

Question 16

Desired reserve ratio

Answer 16

Is the ratio of reserves to deposits that banks consider prudent to hold

Question 17

Excess reserves

Answer 17

Equal actual reserves minus required reserves