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Exam 14: The Money Supply Process

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Question 21

Multiple Choice

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If the Fed decides to reduce bank reserves,it can

A) purchase government bonds.
B) extend discount loans to banks.
C) sell government bonds.
D) print more currency.

E) C) and D)
F) B) and C)

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Question 22

Multiple Choice

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When the Federal Reserve extends a discount loan to a bank,the monetary base ________ and reserves ________.

A) remains unchanged;decrease
B) remains unchanged;increase
C) increases;increase
D) increases;remain unchanged

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

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Question 23

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In the simple deposit expansion model,if the Fed extends a $100 discount loan to a bank that previously had no excess reserves,deposits in the banking system can potentially increase by

Assuming initially that the required reserve ratio = 10%,the currency-deposit ratio = 75%,and the excess reserve ratio = 156%,an increase in the excess reserve ratio to 200% causes the M1 money multiplier to ________,everything else held constant.

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

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

In the simple deposit expansion model,an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 10 percent implies that the Fed

The interest rate the Fed charges banks borrowing from the Fed is the

Assuming initially that the required reserve ratio = 10%,the currency-deposit ratio = 75%,and the excess reserve ratio = 156%,an increase in the currency-deposit ratio to 150% causes the M1 money multiplier to ________,everything else held constant.

In the simple deposit expansion model,if the Fed purchases $100 worth of bonds from a bank that previously had no excess reserves,deposits in the banking system can potentially increase by

Everything else held constant,if the sum of the required reserve ratio and the excess reserve ratio is less than one,a decrease in the currency-checkable deposit ratio will mean

In the early 1930s,the currency-deposit ratio rose,as did the level of excess reserves.Money supply analysis predicts that,everything else held constant,the money supply should have

Everything else held constant,an increase in wealth will cause the holdings of checkable deposits to the holdings of currency to ________ and the currency ratio will ________.

The M2 money supply is represented by

Everything else held constant,an increase in the time deposit ratio will result in ________ in the M1 money multiplier and ________ in the M2 money multiplier.

When the Federal Reserve calls in a discount loan from a bank,the monetary base ________ and reserves ________.

If reserves in the banking system increase by $100,then checkable deposits will increase by $1000 in the simple model of deposit creation when the required reserve ratio is

If reserves in the banking system increase by $100,then checkable deposits will increase by $667 in the simple model of deposit creation when the required reserve ratio is

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

The volume of loans that the Fed makes to banks is affected by the Fed's setting of the interest rate on these loans,called the