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Exam 17: The Money Supply Process

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Question 71

Multiple Choice

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When the Fed supplies the banking system with an extra dollar of reserves, deposits ________ by ________ than one dollar-a process called multiple deposit creation.

A) increase; less
B) increase; more
C) decrease; less
D) decrease; more

E) A) and D)
F) A) and B)

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Question 72

Multiple Choice

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The amount of deposits that banks must hold in reserve is

A) excess reserves.
B) required reserves.
C) total reserves.
D) vault cash.

E) A) and D)
F) None of the above

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Question 73

Multiple Choice

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Reserves are equal to the sum of

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

If the required reserve ratio is 25 percent, the simple deposit multiplier is

An increase in which of the following leads to a decline in the monetary base?

Explain the complete formula for the M1 money supply, and explain how changes in required reserves, excess reserves, the currency ratio, the nonborrowed base, and borrowed reserves affect the money supply.

Which is the most important category of Fed assets?

Everything else held constant, an increase in the money market fund ratio will mean ________ in the M2 money multiplier and ________ in the M2 money supply.

Assuming initially that rr = 10%, c = 40%, and e = 0, an decrease in c to 30% causes the M1 money multiplier to ________, everything else held constant.

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the excess reserves-checkable deposit ratio is

Everything else held constant, an increase in the time deposit ratio will mean ________ in the M2 money multiplier and ________ in the M2 money supply.

High-powered money minus reserves equals

The government agency that oversees the banking system and is responsible for the conduct of monetary policy in the United States is

Everything else held constant, a decrease in the currency ratio will mean ________ in the M1 money multiplier and ________ in the M2 money multiplier.

If the required reserve ratio is one-third, currency in circulation is $300 billion, and checkable deposits are $900 billion, then the money supply is ________ billion.

A Fed purchase of gold, SDRs, a deposit denominated in a foreign currency or any other asset is just an open market ________ of these assets, ________ the monetary base.

Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, 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 on deposit with the Federal Reserve.

When an individual sells a $100 bond to the Fed, she may either deposit the check she receives or cash it for currency. In both cases

An increase in Treasury deposits at the Fed causes