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32 Cards in this Set

  • Front
  • Back
The flow of money has a direct effect on how the economy performs
Liquidity is variavle, depending on the nature of the asset
MZM is sometimes referred to as the "base" money supply
The agreed-upon value of money it has on deposit, minus the reserve requirement
Banks can loan customers the money it has on deposit, minus the reserve requirement
A bank may not use excess reserves to give depositors their money back if they demand it
Most large money transactions involve ledger entries rather than the movement of physical currrency
A dollar bill represents an obligation of the government to provide a commodity of value to you
Generally speaking, when interest rates are high more credit is accessible and the economy tends to grow quickly
The prime rate is usually the same among major banks
If there is too much money moving in the economy
prices may rise, causing inflation
Which of the following assets is the most liquid?
the money in your wallet
Which of the following elements of the money supply, as defined by the Federal Reserve, can be spent immediately?
The official currency of the United States can properly be classified as
Fiat money
Which of the following is NOT considered a factor in money creation?
the printing of currency by the Bureau of Engraving and Printing
Which of the following would be considered a secondary reserve for a bank?
securities the bank has purchased from the Federal government
Money on deposit, minus ____, can be loaned by banks to customers.
the reserve requirement
If banks must hold more money in reserve,
there is less money available to lend
The interest rate the Federal Reerve charges for loans to member banks is called the
discount rate
The Federal Reserve influences the federal funds rate by
buying and selling government securities
The _______ supply is defined as the liquid assets held by banks and individuals.
The measure of how quickly things may be converte to something of value is called __________.
MZM is measure of the annual ________ in the money supply
________ measures are tools used to estimate the size of the money supply
______ money is based on some item of value, such as gold or precious stones
________ money is money that is deemed legal tender by a government.
Resources a bank uses to create money through its business transactions are called ____________ reserves.
The ____________ effect is a phenomenon that creates new deposits from lending.
The federal _____ rate is the amount of interest charged for short-term, interbank loans.
The __________ rate is the interest rate the Federal Reserve sets and charges for loans to member banks.
Calculate the total of money "created" from a deposit of $10,000 as it moves through four cycles of deposit. Assume a reserve rate of 12 percent. (Round answer to nearest two decimal places.)
1) 10,000 x .12= 1200
10,000-1200= 8,800
2) 8,800 x .12= 1,056
3) 7,774 x .12= 929.28
7,774-929.28= 6,814.72
4) 6,814.72 x .12= 817.77
Total= $29,355.67
Calculate the total amount of money "created" from a deposit of $5,000 as it moves through four cycles of deposit. Assume a reseve rate of 15 percent. (Tound answer to nearest two decimal places.)
1) $5,000 x .15 = 750
5,000-750= $4,250
2) $4,250 x .15 = 637.50
4,250-637.50= 3,612.50
3) $3,612.50 x .15= 541.88
3,612-541.88= 3,070.62
4) $3,070.62 x .15= 460.59
3,070.62-460.59= 2,610.03
Total Deposits: $13,543.15