Money, Banking, and the Economy

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.

1)
As of 2006, about how many banks were there in the United States?
1)
_______ A)
7500
B)
57
C)
2000
D)
14,000

2)
The United States has a dual banking system in the sense that
2)
_______ A) the public may deposit money in either commercial banks or savings-and-loan associations. B) banks offer both demand deposits and time deposits to savers. C) banks both take in deposits and make loans. D) banks are chartered by the federal government and by state governments.

3)
What are federally chartered banks called?
3)
_______ A)
Federal banks
B)
Central banks C)
National banks
D)
Federal Reserve banks

4)
From 1863 to 1914, which banks issued bank notes?
4)
_______ A)
Only national banks
B)
Only state banks C)
Only Federal Reserve banks
D)
Both state and national banks

5)
Why did state banks begin to offer demand deposits?
5)
_______ A)
They were prohibited by federal banking law from offering loans to small businesses. B)
They were prohibited by federal banking law from offering time deposits. C)
They were prohibited by federal banking law from offering loans to households. D)
Federal banking law imposed a tax on state bank notes.