revision questions chapter 24 pt4 Flashcards
1
Q
A desired reserve ratio of 5 per cent yields a deposit multiplier of..
A
20
1/0.05= 20
the deposit multiplier represents the amount by which an initial deposit can be multiplied through the banking system.
2
Q
what is the required reserve ratio
A
ratio of reserves to deposits that banks are required, by regulation, to hold.
3
Q
what is M4 a measure of
A
money and includes both currency and deposits.
4
Q
A primary function of money is to
A
serve as a unit of account.
5
Q
Bond prices and interest rates are
A
inversely related
6
Q
The opportunity cost of holding money increases when
A
the interest rate rises.
7
Q
The functions of money are
A
medium of exchange, unit of account, and store of value.
8
Q
The larger the desired reserve ratio, the
A
smaller is the deposit multiplier.
