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Exam 14: The Money Supply Process

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Question 81

Multiple Choice

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

A) 100 percent.
B) 50 percent.
C) 25 percent.
D) 0 percent.

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

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Question 82

Multiple Choice

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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

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

E) B) and C)
F) A) and B)

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Question 83

Multiple Choice

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If the required reserve ratio is 10 percent,currency in circulation is $400 billion,checkable deposits are $1,000 billion,and excess reserves total $1 billion,then the currency-deposit ratio is

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

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

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

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 Fed's holdings of securities consist primarily of ________,but also in the past have included ________.

Excess reserves are equal to

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 ________.

If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 10 percent,then the bank has actual reserves of

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

Assuming initially that the required reserve ratio = 15%,the currency-deposit ratio = 40%,and the excess reserve ratio = 5%,a decrease in the excess reserve ratio to 0% causes the M1 money multiplier to ________,everything else held constant.

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.

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 M1 money multiplier is

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

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

Assuming initially that the required reserve ratio = 10%,the currency-deposit ratio = 40%,and the excess reserve ratio = 0,an decrease in the currency-deposit ratio to 30% causes the M1 money multiplier to ________,everything else held constant.

Everything else held constant,an increase in the interest rate paid on checkable deposits will cause ________ in the amount of checkable deposits held relative to currency holdings and ________ in 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