Question 1

Since the Federal Reserve sets the required reserve ratio to less than one,one dollar of reserves can support ________ of checkable deposits.

Accepted Answer

A)   exactly one dollar
B)   less than one dollar
C)   more than one dollar
D)   exactly twice the amountE) A) and B)
F) A) and C)

Question 2

If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 10 percent,then the bank has actual reserves of

Accepted Answer

A)   $14,000.
B)   $17,000.
C)   $22,000.
D)   $27,000.E) B) and C)
F) A) and D)

Question 3

If reserves in the banking system increase by $200,then checkable deposits will increase by $500 in the simple model of deposit creation when the required reserve ratio is

Accepted Answer

A)   0.04.
B)   0.25.
C)   0.40.
D)   0.50.E) B) and C)
F) C) and D)

Question 4

In the simple deposit expansion model,an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the Fed

Accepted Answer

A)   sold $200 in government bonds.
B)   sold $500 in government bonds.
C)   purchased $200 in government bonds.
D)   purchased $500 in government bonds.E) A) and B)
F) B) and D)

Question 5

A simple deposit multiplier equal to one implies a required reserve ratio equal to

Accepted Answer

A)   100 percent.
B)   50 percent.
C)   25 percent.
D)   0 percent.E) All of the above
F) A) and C)

Question 6

When the Fed sells $100 worth of bonds to First National Bank,reserves in the banking system

Accepted Answer

A)   increase by $100.
B)   increase by more than $100.
C)   decrease by $100.
D)   decrease by more than $100.E) A) and B)
F) B) and D)

Question 7

If the Fed injects reserves into the banking system and they are held as excess reserves,then the money supply

Accepted Answer

A)   increases by only the initial increase in reserves.
B)   increases by only one-half the initial increase in reserves.
C)   increases by a multiple of the initial increase in reserves.
D)   does not change.E) None of the above
F) B) and C)

Question 8

Which of the following are not assets on the Fed's balance sheet?

Accepted Answer

A)   Discount loans
B)   U.S. Treasury deposits
C)   Cash items in the process of collection
D)   U.S. Treasury billsE) B) and C)
F) None of the above

Question 9

If the required reserve ratio is equal to 10 percent,a single bank can increase its loans up to a maximum amount equal to

Accepted Answer

A)   its excess reserves.
B)   10 times its excess reserves.
C)   10 percent of its excess reserves.
D)   its total reserves.E) B) and C)
F) A) and B)

Question 10

During the bank panics of the Great Depression the excess reserve ratio

Accepted Answer

A)   increased sharply.
B)   decreased sharply.
C)   increased slightly.
D)   decreased slightly.E) A) and C)
F) C) and D)

Question 11

Decisions by depositors to increase their holdings of ________,or of banks to hold ________ will result in a smaller expansion of deposits than the simple model predicts.

Accepted Answer

A)   deposits; required reserves
B)   deposits; excess reserves
C)   currency; required reserves
D)   currency; excess reservesE) None of the above
F) C) and D)

Question 12

The M2 money multiplier is

Accepted Answer

A)   negatively related to high-powered money.
B)   positively related to the time deposit ratio.
C)   positively related to the required reserve ratio.
D)   positively related to the excess reserves ratio.E) None of the above
F) B) and D)

Question 13

Total reserves are the sum of ________ and ________.

Accepted Answer

A)   excess reserves; borrowed reserves
B)   required reserves; currency in circulation
C)   vault cash; excess reserves
D)   excess reserves; required reservesE) A) and D)
F) A) and B)

Question 14

The monetary base increased by 20% during the contraction of 1929-1933,but the money supply fell by 25%.Explain why this occurred.How can the money supply fall when the base increases?

Accepted Answer

The banking crisis caused the public to ...

Question 15

In the simple deposit expansion model,if the Fed extends a $100 discount loan to a bank that previously had no excess reserves,the bank can now increase its loans by

Accepted Answer

A)   $10.
B)   $100.
C)   $100 times the reciprocal of the required reserve ratio.
D)   $100 times the required reserve ratio.E) C) and D)
F) A) and D)

Question 16

Suppose that from a new checkable deposit,First National Bank holds two million dollars in vault cash,eight million dollars on deposit with the Federal Reserve,and nine million dollars in excess reserves. Given this information,we can say First National Bank has ________ million dollars in required reserves.

Accepted Answer

A)   one
B)   two
C)   eight
D)   tenE) None of the above
F) C) and D)

Question 17

If the required reserve ratio is one-third,currency in circulation is $300 billion,checkable deposits are $900 billion,and there is no excess reserve,then the M1 money multiplier is

Accepted Answer

A)   2.5.
B)   2.8.
C)   2.0.
D)   0.67.E) B) and C)
F) All of the above

Question 18

If the required reserve ratio is 15 percent,the simple deposit multiplier is

Accepted Answer

A)   15.0.
B)   1.5.
C)   6.67.
D)   3.33.E) None of the above
F) A) and B)

Question 19

The excess reserves ratio is ________ related to expected deposit outflows,and is ________ related to the market interest rate.

Accepted Answer

A)   negatively; negatively
B)   negatively; positively
C)   positively; negatively
D)   positively; positivelyE) A) and B)
F) None of the above

Question 20

If reserves in the banking system increase by $100,then checkable deposits will increase by $400 in the simple model of deposit creation when the required reserve ratio is

Accepted Answer

A)   0.01.
B)   0.10.
C)   0.20.
D)   0.25.E) C) and D)
F) A) and C)

Exam 14: The Money Supply Process

If reserves in the banking system increase by $200,then checkable deposits will increase by $500 in the simple model of deposit creation when the required reserve ratio is

Correct Answer
verified

If the required reserve ratio is one-third,currency in circulation is $300 billion,checkable deposits are $900 billion,and there is no excess reserve,then the M1 money multiplier is

Correct Answer
verified

The excess reserves ratio is related to expected deposit outflows,and is related to the market interest rate.

Correct Answer
verified

The M2 money multiplier is

Correct Answer
verified

If reserves in the banking system increase by $100,then checkable deposits will increase by $400 in the simple model of deposit creation when the required reserve ratio is

Correct Answer
verified

Decisions by depositors to increase their holdings of ,or of banks to hold will result in a smaller expansion of deposits than the simple model predicts.

Correct Answer
verified

If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 10 percent,then the bank has actual reserves of

Correct Answer
verified

The monetary base increased by 20% during the contraction of 1929-1933,but the money supply fell by 25%.Explain why this occurred.How can the money supply fall when the base increases?

Correct Answer
verified
The banking crisis caused the public to ...
View Answer

Since the Federal Reserve sets the required reserve ratio to less than one,one dollar of reserves can support ________ of checkable deposits.

Correct Answer
verified

If the required reserve ratio is equal to 10 percent,a single bank can increase its loans up to a maximum amount equal to

Correct Answer
verified

During the bank panics of the Great Depression the excess reserve ratio

Correct Answer
verified

In the simple deposit expansion model,if the Fed extends a $100 discount loan to a bank that previously had no excess reserves,the bank can now increase its loans by

Correct Answer
verified

In the simple deposit expansion model,an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the Fed

Correct Answer
verified

If the required reserve ratio is 15 percent,the simple deposit multiplier is

Correct Answer
verified

When the Fed sells $100 worth of bonds to First National Bank,reserves in the banking system

Correct Answer
verified

Total reserves are the sum of and .

Correct Answer
verified

Correct Answer
verified

If the Fed injects reserves into the banking system and they are held as excess reserves,then the money supply

Correct Answer
verified

A simple deposit multiplier equal to one implies a required reserve ratio equal to

Correct Answer
verified

Which of the following are not assets on the Fed's balance sheet?

Correct Answer
verified

Exam 14: The Money Supply Process

If reserves in the banking system increase by $200,then checkable deposits will increase by $500 in the simple model of deposit creation when the required reserve ratio is

Correct AnswerverifiedShow Answer

If the required reserve ratio is one-third,currency in circulation is $300 billion,checkable deposits are $900 billion,and there is no excess reserve,then the M1 money multiplier is

Correct AnswerverifiedShow Answer

The excess reserves ratio is ________ related to expected deposit outflows,and is ________ related to the market interest rate.

Correct AnswerverifiedShow Answer

The M2 money multiplier is

Correct AnswerverifiedShow Answer

If reserves in the banking system increase by $100,then checkable deposits will increase by $400 in the simple model of deposit creation when the required reserve ratio is

Correct AnswerverifiedShow Answer

Decisions by depositors to increase their holdings of ________,or of banks to hold ________ will result in a smaller expansion of deposits than the simple model predicts.

Correct AnswerverifiedShow Answer

If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 10 percent,then the bank has actual reserves of

Correct AnswerverifiedShow Answer

The monetary base increased by 20% during the contraction of 1929-1933,but the money supply fell by 25%.Explain why this occurred.How can the money supply fall when the base increases?

Correct AnswerverifiedThe banking crisis caused the public to ...View AnswerShow Answer

Since the Federal Reserve sets the required reserve ratio to less than one,one dollar of reserves can support ________ of checkable deposits.

Correct AnswerverifiedShow Answer

If the required reserve ratio is equal to 10 percent,a single bank can increase its loans up to a maximum amount equal to

Correct AnswerverifiedShow Answer

During the bank panics of the Great Depression the excess reserve ratio

Correct AnswerverifiedShow Answer

In the simple deposit expansion model,if the Fed extends a $100 discount loan to a bank that previously had no excess reserves,the bank can now increase its loans by

Correct AnswerverifiedShow Answer

In the simple deposit expansion model,an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the Fed

Correct AnswerverifiedShow Answer

If the required reserve ratio is 15 percent,the simple deposit multiplier is

Correct AnswerverifiedShow Answer

When the Fed sells $100 worth of bonds to First National Bank,reserves in the banking system

Correct AnswerverifiedShow Answer

Total reserves are the sum of ________ and ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the Fed injects reserves into the banking system and they are held as excess reserves,then the money supply

Correct AnswerverifiedShow Answer

A simple deposit multiplier equal to one implies a required reserve ratio equal to

Correct AnswerverifiedShow Answer

Which of the following are not assets on the Fed's balance sheet?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

The excess reserves ratio is related to expected deposit outflows,and is related to the market interest rate.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Decisions by depositors to increase their holdings of ,or of banks to hold will result in a smaller expansion of deposits than the simple model predicts.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The banking crisis caused the public to ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Total reserves are the sum of and .

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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