Money and Inflation Practice Quizizz

Currently, what is U.S. money backed by?

• Frankincense
• Silver
• Gold
• Trust that it is worth something

When a bank accepts your money, what do they do with it?

• They stick it in a shoe box and wait for you to come get it back.

• They loan most of it out to people who need money for cars and homes, etc.

• They put it in a big pile in the middle of the safe and dance around it.

• They write your name on every bill and look at it, longing for your return,

How does the FDIC help prevent a bank from failing?

• They help banks find new customers to take out large loans.

• They monitor reserves and deposits of banks to make sure they aren't loaning out too much money.

• They promote the banks through advertising and create new business for the bank.

• They pass laws in Congress to allow the banks to charge more in interest.

A reserve requirement (ratio) is the:

• proportion of cash and security reserves the bank needs to hold.

• fraction of deposits that the bank is required to hold.

• loan to deposit ratio in the bank's balance sheet.

• money belonging to the bank's largest depositors.

If the legal reserve requirement is 25%, the value of the money multiplier is

• 2

• 4

• 5

• 10

• 1

If the reserve requirement is 3% and someone deposits $500, how much money will ultimately get created once all money has been loaned out?

Step 1: Determine the money multiplier. 1 ÷ decimal of the RR (.03)

Step 2: Multiply the deposit by the money multiplier. $500 x MM

• $1,500

• $16,500

• $15

• $1,650

Increasing the reserve requirement would cause banks to:

• lend out more.

• lend out less.

• lend out the same amount.

Increasing the reserve requirement would cause the money supply to:

• increase.

• decrease.

Money supply creates inflation only when ...

• the money is created slower than the economy grows.

• the money is created faster than the economy grows.

Reorder the following:

• higher prices (inflation)

• More money

• money worth less