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Exam 14: The Money Supply Process

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Question 91

Multiple Choice

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

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

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Question 92

Multiple Choice

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When banks borrow money from the Federal Reserve,these funds are called

A) federal funds.
B) discount loans.
C) federal loans.
D) Treasury funds.

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Question 93

Multiple Choice

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An increase in U.S.Treasury deposits at the Fed reduces both ________ and the ________.

The monetary base minus currency in circulation equals

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 monetary base is

The equation that represents M2 in the model of the money supply process is

In the model of the money supply process,the Federal Reserve's role in influencing the money supply is represented by

Everything else held constant,an increase in currency holdings will cause

Suppose your payroll check is directly deposited to your checking account.Everything else held constant,total reserves in the banking system ________ and the monetary base ________.

Explain two ways by which the Federal Reserve System can increase the monetary base.Why is the effect of Federal Reserve actions on bank reserves less exact than the effect on the monetary base?

During the 2007-2009 financial crisis the currency ratio

A bank has excess reserves of $4,000 and demand deposit liabilities of $100,000 when the required reserve ratio is 20 percent.If the reserve ratio is raised to 25 percent,the bank's excess reserves will be

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

If the required reserve ratio is 5 percent,currency in circulation is $400 billion,checkable deposits are $800 billion,and excess reserves total $0.8 billion,then the M1 money multiplier is

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

Everything else held constant,an increase in the excess reserve ratio will mean ________ in the M1 money multiplier and ________ in the M2 money multiplier.

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 monetary base is

Suppose a person cashes his payroll check and holds all the funds in the form of currency.Everything else held constant,total reserves in the banking system ________ and the monetary base ________.

The money supply is ________ related to expected deposit outflows,and is ________ related to the market interest rate.

If reserves in the banking system increase by $100,then checkable deposits will increase by $500 in the simple model of deposit creation when the required reserve ratio is