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.
Use concepts from the modular background readings as well as any good-quality resources you can find. Be sure to cite all sources within the text and provide a reference list at the end of the paper.
Length: 4–5 pages double-spaced and typed.
The following items will be assessed in particular:
- Your ability to understand an application of monetary policy.
- Some in-text references to the modular background material (APA formatting recommended).
- The essay should address each element of the assignment. Remember to support your answers with solid references including the case readings.