Money, Banking and the Economy

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California State University Los Angeles
Department of Economics

Economics 303
Money and Banking and the Economy
Prof. Giorgio Canarella
Fall Quarter 2012
Midterm 2

Return your work Saturday, November 10, at 1:00 pm

Problem (50 points) Use a blue book.

You are given the following estimates about the monetary economy of the US:
C/D = 0.1; T/D = 2; ER/D = 0.2, [pic], [pic], MB = 1000. Compute the money multiplier, the money supply, the level of currency and checkable deposits, the level of time deposits and excess reserves, and the level of total reserves and required reserves. Use the model of money supply determination discussed in class. Show your work.

Multiple Choice Questions (50 points) Use a scantron.

As of 2006, about
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B) established the Federal Reserve System. C) separated commercial banking from investment banking. D) put a tax on the issuance of bank notes by state banks.

The Glass-Steagall Act of 1933
______ A) separated commercial banking from investment banking. B) prohibited branching across state lines. C) forbade the opening of nonbank banks. D) made bank holding companies illegal.

Regulation Q
______ A) required all banks to hold reserves against demand deposits. B) placed ceilings on allowable interest rates on time and savings deposits. C) prohibited interstate banking. D) broadened the basis on which the Fed could make discount loans.

NOW accounts were developed in order to
______ A) provide banks with a liquid, interest-earning asset. B) provide banks with a checkable deposit on which they did not have to pay interest. C) circumvent Regulation Q. D) provide banks with a means of earning interest on the funds in their reserve accounts with the Fed.

The British central bank is known as
______ A) the British Federal Reserve.
the Bank of England. C) the Bank of London.
the Bank of the Empire.

The Japanese central bank is known as
______ A) the Grand Nippon Central Bank.
the Bank of Japan. C)
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