ECON 214 ECON214 Module 5 Problem Set 4 (Liberty University)

ECON 214 ECON214 Module 5 Problem Set 4 (Liberty University)

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ECON214 Module 5 Problem Set 4 (Liberty University)

What determines whether a financial asset is included in the M1 money supply? Why are interest-earning checkable deposits included in M1, whereas interest-earning savings accounts and Treasury bills are not? 

Why are banks able to maintain reserves that are only a fraction of the demand and savings deposits of their customers? Is your money safe in a bank? Why or why not?

What is the Federal Funds Interest rate? if the Fed wants to use open market operations to lower the federal funds rate, what action should it take?

Suppose that the reserve requirement is 10 percent and the balance sheet of the People's National Bank looks like the accompanying example. 


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