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This simulation demonstrates how the Fed can increase or decrease the money supply and how a banking system can create money. The money supply (M1) takes two main forms: currency held by the public and checkable deposits (a third form, traveler’s checks, will be ignored in this simulation). Most people find it convenient to hold some of their money as currency so they can make small payments ...

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The Federal Open Market Committee closely examines the money supply and determines if it needs to be expanded or contracted. If the money supply needs to increase, the Fed buys more bonds. The Federal Reserve purchases the government bonds in the open market with currency. As a result, commercial banks now have more currency and thus more money in their reserves. The bank now …

[DOCX File]Chapter 10 - Section 1 - Weebly
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The Federal Reserve System. Vocab / Review questions. Define: Federal Open Market Committee (FOMC) – Federal Reserve System – Board of Governors of the Federal Reserve System – Reserve Account – Review Questions: In what year did the Fed begin operating? Explain how a check is cleared. What does it mean when we say the Fed is the lender of last resort? Do you think banks need the Fed ...

[DOC File]Practice Homework 7 - SSCC - Home
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The Federal Reserve system. The money multiplier. The relationship between the money market and the bond market. Multiple Choice Questions: 1. Which of the following is NOT a function of money? (a) It facilitates the barter system. (b) It serves as a store of wealth. (c) It serves as a unit of value. (d) It serves as a medium of exchange. ANS: (a) - barter is the transaction system used before ...

[DOC File]CHAPTER 29
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The primary responsibilities of the Federal Reserve are to regulate banks, ensuring the health of the banking system, and to control the quantity of money that is made available in the economy. If the Fed wants to increase the supply of money, it usually does so by creating dollars and using them to purchase government bonds from the public in the nation’s bond markets. 3. Banks create money ...

[DOC File]Part VII. Multiple Deposit Creation: Introducing the Money ...
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There are 4 major players in the money supply process: (1) The Federal Reserve System (2) The banking system (i.e. depository institutions) (3) Depositors (4) Borrowers . We will discuss the roles and functions of the Fed in detail in a later section. However, since the Fed plays a key role in the money supply process, we will provide a brief overview of the Fed in this section. Brief overview ...

[DOC File]1) The four players in the money supply process include
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the money supply. the monetary base. Federal Reserve liabilities. near-cash. Question Status: Previous Edition. The monetary base is the sum of. vault cash, deposits at the Fed, and currency in circulation. Federal Reserve currency in circulation and Treasury currency in circulation. vault cash, deposits at the Fed, and Federal Reserve currency in circulation. government securities and ...

[DOC File]AP Economics Chapters 13, 14, 15 Exam
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Which is the most important function of the Federal Reserve System? A) setting reserve requirements. B) controlling the money supply. C) lending money to banks and thrifts. D) acting as the fiscal agent for the U.S. government . 26. A single commercial bank must meet a 25 percent reserve requirement. If it initially has no excess reserves and then $2,000 in cash is deposited in the bank, it ...

[DOC File]CHAPTER 15
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This chapter deals with the Federal Reserve System and monetary policy. After reading this chapter, students should be able to: ... By making more reserves available to the banking system, the money supply would tend to increase. This would cause interest rates to fall, investment spending to increase, aggregate demand to increase, and the level of real output and employment to increase. To ...

The money supply and the federal reserve system