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Exam 17: The Money Supply Process

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Question 61

Multiple Choice

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If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the excess reserves-checkable deposit ratio is

A) 0.001.
B) 0.10.
C) 0.01.
D) 0.05.

E) A) and D)
F) A) and C)

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Question 62

Multiple Choice

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When the Fed extends a $100 discount loan to the First National Bank, reserves in the banking system

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)

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Question 63

Multiple Choice

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Suppose that from a new checkable deposit, First National Bank holds eight million dollars on deposit with the Federal Reserve, one million dollars in required reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has ________ million dollars in excess reserves.

Individuals that lend funds to a bank by opening a checking account are called

The monetary base minus reserves equals

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

Purchases and sales of government securities by the Federal Reserve are called

Everything else held constant, an increase in the required reserve ratio on checkable deposits causes the M1 money multiplier to ________ and the money supply to ________.

The M2 money supply is represented by

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

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 monetary base is

If a member of the nonbank public purchases a government bond from the Federal Reserve in exchange for currency, the monetary base will ________, but reserves will ________.

The amount of borrowed reserves is ________ related to the discount rate, and is ________ related to the market interest rate.

Everything else held constant, an increase in the currency-checkable deposit ratio will mean

The percentage of deposits that banks must hold in reserve is the

Everything else held constant, a decrease in the required reserve ratio on checkable deposits will mean

A bank has excess reserves of $1,000 and demand deposit liabilities of $80,000 when the reserve requirement is 20 percent. If the reserve requirement is lowered to 10 percent, the bank's excess reserves will be

The formula for the simple deposit multiplier can be expressed as

The steepest increase in the currency ratio since 1892 occurred during

Factors causing an increase in currency holdings include