ECO 201 Chapter 25 Money, the Price Level, and Inflation Test Questions and Answers Solved
Correctly
A bank's bank and public authority that regulates a nation's depository institutions and conducts
monetary policy, which means that it adjusts the quantity of money in circulation and influences interest
rates. - Answers Central bank
The notes and coins held by individuals and businesses. - Answers Currency
We call the leakage of bank reserves into currency the currency drain, and we call the ratio of currency
to deposits the currency drain ratio. - Answers Currency drain ratio
The relationship between the quantity of real money demanded and the nominal interest rate when all
other influences on the amount of money that people wish to hold remain the same. - Answers Demand
for money
A financial firm that takes deposits from households and firms. - Answers Depository institution
The ratio of reserves to deposits that the banks plan to hold. - Answers Desired reserve ratio
A bank's actual reserves minus its desired reserves. - Answers Excess reserves
The interest rate an overnight loans to other banks. - Answers Federal funds rate
(FOMC) The main policy-making organ of the Federal Reserve System. - Answers Federal Open Market
Committee
The central bank of the United States. - Answers Federal Reserve System (the Fed)
The Fed is the lender of last resort, which means that if a bank is short of reserves, it can borrow from
the Fed. - Answers Lender of last resort
Consists of currency and traveler's checks plus checking deposits owned by individuals and businesses. -
Answers M1
Consists of M1 plus time deposits, savings deposits, and money market mutual funds and other
deposits. - Answers M2
A method of setting a debt. - Answers Means of payment
The sum of currency (Federal Reserve notes and coins) and depository institution deposits at the Fed. -
Answers Monetary base
Any commodity or token that is generally acceptable as a means of payment. - Answers Money
The ratio of the change in the quantity of money to the change in monetary base. - Answers Money
multiplier
Correctly
A bank's bank and public authority that regulates a nation's depository institutions and conducts
monetary policy, which means that it adjusts the quantity of money in circulation and influences interest
rates. - Answers Central bank
The notes and coins held by individuals and businesses. - Answers Currency
We call the leakage of bank reserves into currency the currency drain, and we call the ratio of currency
to deposits the currency drain ratio. - Answers Currency drain ratio
The relationship between the quantity of real money demanded and the nominal interest rate when all
other influences on the amount of money that people wish to hold remain the same. - Answers Demand
for money
A financial firm that takes deposits from households and firms. - Answers Depository institution
The ratio of reserves to deposits that the banks plan to hold. - Answers Desired reserve ratio
A bank's actual reserves minus its desired reserves. - Answers Excess reserves
The interest rate an overnight loans to other banks. - Answers Federal funds rate
(FOMC) The main policy-making organ of the Federal Reserve System. - Answers Federal Open Market
Committee
The central bank of the United States. - Answers Federal Reserve System (the Fed)
The Fed is the lender of last resort, which means that if a bank is short of reserves, it can borrow from
the Fed. - Answers Lender of last resort
Consists of currency and traveler's checks plus checking deposits owned by individuals and businesses. -
Answers M1
Consists of M1 plus time deposits, savings deposits, and money market mutual funds and other
deposits. - Answers M2
A method of setting a debt. - Answers Means of payment
The sum of currency (Federal Reserve notes and coins) and depository institution deposits at the Fed. -
Answers Monetary base
Any commodity or token that is generally acceptable as a means of payment. - Answers Money
The ratio of the change in the quantity of money to the change in monetary base. - Answers Money
multiplier
