Submit a 4- to 5-page paper that addresses the following questions. Be sure to use references within the paper to support your answers. Show work for all calculations.
- Are credit cards or debit cards money? Explain your answer.
- Assume that the bank holds no excess reserves and that the required reserve ratio equals 10% of deposits. If a customer deposits $5,000, what would be the total increase in checking account balances throughout all banks? Explain the process by which the banking system creates money.
- In your own words, list the Fed’s main policy tools and briefly explain each one.
- TRUE or FALSE. “When the Fed makes an open market purchase of government securities, the quantity of 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.