MAC M3C3

MAC M3C3

Submit a 5-page paper that addresses the following questions. Be sure to use references within the paper to support your answers, which show you understand the subject. Show work for all calculations.

1. Are credit cards or debit card money? Explain your answer thoroughly.

2. Assume that the bank holds no excess reserves and that the required reserve ratio equals 10% of deposits. If a customer deposits $5000, what would be the total increase in checking account balances throughout the banks? Explain the process by which the banking system creates money.

3. In your own words, list the Fed’s main policy tools and briefly explain each one.

4. TRUE or FALS.E “When the Fed makes an open market purchase of government securities, the quantity of the money will eventually decrease by a fraction of the initial change in the monetary base.” Is the previous statement correct or incorrect? Explain your answer thoroughly.