1. What are the various functions of nancial intermediaries? What kinds of
nancial intermediaries exist in the U.S.?
Function of Financial Intermediaries: Indirect nance
° Lower transaction costs (time and money spent in carrying out financial
Multiple Deposit Creation: A Simple Model
1)When the Fed supplies the banking system with an extra dollar of reserves, deposits increase by
more than one dollarDa process called
B) multiple deposit creation.
2)When the Fed supplies the banking system with
Study Guide: Open Market Operations
1) The Fed uses three policy tools to manipulate the money supply:
, which affect reserves
and the monetary base; changes in
, which affect the monetary base; and changes in , which affect the money multiplier.
Test 1 Money and Banking 331
Fall, 2012 Dr. Vorst , Name
Circle the correct answer only.
1) Financial markets promote economic efciency by
A) adding fees to transactions and providing a prot for nancial institutions.
B reating opportunities for inat
The Fed's Balance Sheet and the Monetary Base
I ) Which is the most important category of Fed assets?
2) The two most important categories of assets on the Fed's balance sheet are
because they earn interest.
Control of the Monetary Base
1 ) The monetary base minus currency in circulation equals
2)The monetary base minus reserves equals
A)currency in circulation.
3) High-powered money minus reserves equals
B)currency in circulation.