1. What is the definition of “money” in economics?
2. What assets are included in the two main measures of money: M1 and M2?
3. What is meant by a “run on a bank”?
4. What are the main assets of banks? What are the main liabilities of banks?
5. What is meant by “required reserves”? What is meant by “excess reserves”?
6. Explain in detail how banks create money by making loans.
7. What is meant by the “money multiplier”?
What determines the size of the money multiplier?
8. What is the Federal Open Market Committee?
9. What is meant by “lender of last resort”?
10. Explain how the Fed influences the money supply through the following policies:
a. reserve requirements.
b. discount rate.
c. open market operations.
11. What is the meaning of a vertical supply curve for money?
12. Problem set: 1, 2, 4-6, and 9-11.