revision questions chapter 24 pt3

Question 1

sight deposit at banks are

Answer 1

money

Question 2

A customer deposits £500 in the Quayle Bank of York. All banks have a desired reserve ratio of 5 per cent. Banks hold no excess reserves and people hold no currency. The amount of new deposits eventually created is

Answer 2

500/ 5% = £10,000

Question 3

The definition of M4 includes

Answer 3

• currency
• time deposit at building societies
• sight deposit

Question 4

the nominal demand for money is…

Answer 4

proportional to the price level

Question 5

Suppose that the interest rate is greater than the equilibrium interest rate. Which of the following occurs?

Answer 5

• there is an excess quantity of money
• people start buying bonds

Question 6

The unit of account function occurs when money serves as

Answer 6

the way in which prices are quoted.

Question 7

Your deposit at your bank is ________ for you and ________ for your bank.

Answer 7

an asset; a liability

Question 8

Which of the following balance sheet items is a liability of a commercial bank?

Answer 8

The public’s deposits with the bank