Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 28, Problem 3SCQ
Bank runs are often described as “self-fulfilling prophecies.” Why is this phrase appropriate to bank runs?
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Given the danger of bank runs, why do banks not keep the majority of deposits on hand to meet the demands of depositors?
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Chapter 28 Solutions
Principles of Economics 2e
Ch. 28 - Why is it important for the members of the Board...Ch. 28 - Given the danger of bank runs, why do banks not...Ch. 28 - Bank runs are often described as self-fulfilling...Ch. 28 - If the central bank sells 500 in bonds to a bank...Ch. 28 - What would be the effect of increasing the banks...Ch. 28 - Why does contractionary monetary policy cause...Ch. 28 - Why does expansionary monetary policy causes...Ch. 28 - Why might banks want to hold excess reserves in...Ch. 28 - Why might the velocity of money change...Ch. 28 - How is a central bank different from a typical...
Ch. 28 - List the three traditional tools that a central...Ch. 28 - How is bank regulation linked to the conduct of...Ch. 28 - What is a bank run?Ch. 28 - In a program of deposit insurance as it is...Ch. 28 - In government programs of bank supervision, what...Ch. 28 - What is the lender of last resort?Ch. 28 - Name and briefly describe the responsibilities of...Ch. 28 - Explain how to use an open market operation to...Ch. 28 - Explain how to use the reserve requirement to...Ch. 28 - Explain how to use the discount rate to expand the...Ch. 28 - How do the expansionary and contractionary...Ch. 28 - How do tight and loose monetary policy affect...Ch. 28 - How do expansionary, tight, contractionary, and...Ch. 28 - Which kind of monetary policy would you expect in...Ch. 28 - Explain how to use quantitative easing to...Ch. 28 - Which kind of monetary policy would you expect in...Ch. 28 - How might each of the following factors complicate...Ch. 28 - Define the velocity of the moneyCh. 28 - What is the basic quantity equation of money?Ch. 28 - How does a monetary policy of inflation target...Ch. 28 - Why do presidents typically reappoint Chairs of...Ch. 28 - In what ways might monetary policy be superior to...Ch. 28 - The term moral hazard describes increases in risky...Ch. 28 - Explain what would happen if banks were notified...Ch. 28 - A well-known economic model called the Phillips...Ch. 28 - How does rule-based monetary policy differ from...Ch. 28 - Is it preferable for central banks to primarily...Ch. 28 - Suppose the Fed conducts an open market purchase...Ch. 28 - Suppose the Fed conducts an open market sale by...Ch. 28 - All other things being equal, by how much will...Ch. 28 - Suppose now that economists expect the velocity of...Ch. 28 - If GDP is 1,500 and the money supply is 400, what...Ch. 28 - If GDP now rises to 1,600, but the money supply...Ch. 28 - If GDP now falls back to 1,500 and the money...
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Similar questions
- Describe the tools the central bank uses to control the money supply in the economy? Explain why the central bank’s control over the money supply is not perfect? Answer must be correct. Answer Briefly.arrow_forwardWhich of the following is an example of fiat money? Group of answer choices A U.S. one-hundred dollar bill Cigarettes A government bond An ounce of goldarrow_forwardHow can a central bank acting as a lender of last resort stop a bank panic?arrow_forward
- Give 3 reasons why Central Bank is the "lender of last resort"?arrow_forwardWHAT ARE CONVENTIONAL MONETARY POLICY TOOLS?arrow_forwardWhich interest rate is most likely to serve as the target interest rate by a Central Bank? a)The rate on six-month loans of bank reserves. b)The rate on overnight loans of bank reserves. c)The rate on 30-year mortgage loans. d)The rate on credit card balances. e)The rate on 10-year auto loans.arrow_forward
- What are the terms in this question ? A liquidity trap is a situation where a portion of the moneydemand curve becomes horizontal; people are willing to hold unlimited amounts of money at some low interest rate.arrow_forwardNaked Economics: Undressing the Dismal Science Book by Charles Wheelan Please refer to the chapter 10 titled, "The Federal Reserve," in the Naked Economics book to answer this question. Which of the below statements DOES NOT CORRECTLY capture the meaning of the word "money" as economists use the term, and as Charles Wheelan explains the term in this chapter? A) Whatever serves as money must be available in abundance, and must not be scarce. B) It serves as a medium of exchange, something that facilitates trade and transactions. C) It serves as a unit of account, so that the costs of all kinds of goods and services can be measured can be compared using one scale. D) Whatever serves as money must be portable and durable.arrow_forwardCreate an example (make up your own numbers) for a virtual bank in the case of a decline in the required reserve ratio.arrow_forward
- Give a detailed answer to the theoretical question: Display graphically and explain the phenomenon of money illusion.arrow_forwardContrast the actions a central bank would take to increase the quantity of money in the economy with the actions it would take to produce the opposite effectarrow_forwardHow does the textbook money creation model differ from the real world money creation model? What’s wrong about the way that most people think banks work?arrow_forward
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