Graph Journal
The Financial Sector
Why is it important?
Our central bank is ________________________________
Define Money
The Three Functions of Money
How does M1 differ from M2?
What is the reserve ratio?
If you deposit $100 dollars into the bank and the reserve ratio is .6, how much can the bank
initially loan out from your deposit?
The higher the reserve ratio the ______________ smaller the money multiplier
Simple Money Multiplier=
How much money will ultimately be created by your $100 dollar deposit?
Money Multiplier when people hold currency=
If banks hold 20% of their deposits as reserves, and the ratio of money people hold as currency
to deposits is 20%, what is the money multiplier?
If people suddenly decide to hold more currency, what happens to the size of the money
multiplier?
Graph Journal
Money Market
What are three reasons people hold money?
What is the relationship between interest rates and the price of bonds?
Money Market
Why is the demand for money downward
sloping?
Why is the supply of money vertical?
Is the interest rate nominal or real? How do you
know?