ECON 2305 - Money, Banking, Financial Institutions & the Federal Reverse System

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15 Terms

1
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How many Federal Reserve districts are there?

12 districts

2
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Which district is most relevant to UTA students?

11th District (Dallas)

3
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How many branch banks are in the 11th District?

3 Branches

4
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Which cities have branch banks in the 11th District?

  • El Paso, Texas

  • Houston, Texas

  • San Antonion, Texas


5
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Which states are represented in the 11th District?

  • Texas

  • Louisiana

  • New Mexico


6
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Which state has two Federal Reserve District banks?

Missouri (Kansas City and St. Louis)

7
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What are the 4 C’s of Banking?

Character, Capacity, Capital, Collateral

8
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What are the 4 tools of the Federal Reserve?

  • Open Market Operations (OMO)

  • Reserve Requirement

  • Discount Rate

  • Interest on reverse balances


9
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Which Fed tool is most powerful?

Federal Fund Rate

10
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Which Fed tool is best and why?

11
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Who advocated a 100% reverse requirement?

Milton Friedman

12
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What happens to the money multiplier if RR=100%?

The money multiplier falls to 1, meaning no deposit expansion occurs because banks must hold all deposits as reserves.

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Money Multiplier Formula

1/Required Reserve Ratio

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How does the reserve requirement affect money?

  • Higher requirement=Lower money supply

  • Lower rate=High money supply


15
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How does the discount rate affect money supply?

  • Higher rate=Lower money supply

  • Lower rate=High money supply