Question 1

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

Accepted Answer

A) the money supply to rise. 
B) the money supply to remain constant. 
C) the money supply to fall. 
D) checkable deposits to rise. 
A) the money supply to rise. 
B) the money supply to remain constant. 
C) the money supply to fall. 
D) checkable deposits to rise.

Question 2

If reserves in the banking system increase by $200,then checkable deposits will increase by $500 in the simple model of deposit creation when the required reserve ratio is

Accepted Answer

A) 0.04. 
B) 0.25. 
C) 0.40. 
D) 0.50. 
A) 0.04. 
B) 0.25. 
C) 0.40. 
D) 0.50.

Question 3

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

Accepted Answer

A) 0.01. 
B) 0.10. 
C) 0.20. 
D) 1.00. 
A) 0.01. 
B) 0.10. 
C) 0.20. 
D) 1.00.

Question 4

When the Fed sells $100 worth of bonds to First National Bank,reserves in the banking system

Accepted Answer

A) increase by $100. 
B) increase by more than $100. 
C) decrease by $100. 
D) decrease by more than $100. 
A) increase by $100. 
B) increase by more than $100. 
C) decrease by $100. 
D) decrease by more than $100.

Question 5

The monetary base minus reserves equals

Accepted Answer

A) currency in circulation. 
B) the borrowed base. 
C) the nonborrowed base. 
D) discount loans. 
A) currency in circulation. 
B) the borrowed base. 
C) the nonborrowed base. 
D) discount loans.

Question 6

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

Accepted Answer

A) three 
B) nine 
C) ten 
D) eleven 
A) three 
B) nine 
C) ten 
D) eleven

Question 7

If the required reserve ratio is 10 percent,the simple deposit multiplier is

Accepted Answer

A) 5.0. 
B) 2.5. 
C) 100.0. 
D) 10.0 
A) 5.0. 
B) 2.5. 
C) 100.0. 
D) 10.0

Question 8

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.

Accepted Answer

A) $2700 
B) $3000 
C) $1200 
D) $1800 
A) $2700 
B) $3000 
C) $1200 
D) $1800

Question 9

An increase in the nonborrowed monetary base,everything else held constant,will cause

Accepted Answer

A) the money supply to fall. 
B) the money supply to rise. 
C) no change in the money supply. 
D) demand deposits to fall. 
A) the money supply to fall. 
B) the money supply to rise. 
C) no change in the money supply. 
D) demand deposits to fall.

Question 10

When a bank sells a government bond to the Federal Reserve,reserves in the banking system ________ and the monetary base ________,everything else held constant.

Accepted Answer

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

Question 11

For which of the following is the change in reserves necessarily different from the change in the monetary base?

Accepted Answer

A) Open market purchases from a bank 
B) Open market purchases from an individual who deposits the check in a bank 
C) Open market purchases from an individual who cashes the check 
D) Open market sale to a bank 
A) Open market purchases from a bank 
B) Open market purchases from an individual who deposits the check in a bank 
C) Open market purchases from an individual who cashes the check 
D) Open market sale to a bank

Question 12

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

Accepted Answer

A) $400 billion. 
B) $401 billion. 
C) $500 billion. 
D) $501 billion. 
A) $400 billion. 
B) $401 billion. 
C) $500 billion. 
D) $501 billion.

Question 13

The sum of the Fed's monetary liabilities and the U.S.Treasury's monetary liabilities is called

Accepted Answer

A) the money supply. 
B) currency in circulation. 
C) bank reserves. 
D) the monetary base. 
A) the money supply. 
B) currency in circulation. 
C) bank reserves. 
D) the monetary base.

Question 14

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 M1 money multiplier is

Accepted Answer

A) 2.5. 
B) 2.8. 
C) 2.0. 
D) 0.7. 
A) 2.5. 
B) 2.8. 
C) 2.0. 
D) 0.7.

Question 15

Everything else held constant,a decrease in the currency ratio causes the M1 money multiplier to ________ and the money supply to ________.

Accepted Answer

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

Question 16

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

Accepted Answer

A) 0.01. 
B) 0.10. 
C) 0.20. 
D) 0.25. 
A) 0.01. 
B) 0.10. 
C) 0.20. 
D) 0.25.

Question 17

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

Accepted Answer

A) the excess reserve. 
B) both the excess reserve and the market interest rate. 
C) the currency ratio. 
D) only borrowed reserves. 
A) the excess reserve. 
B) both the excess reserve and the market interest rate. 
C) the currency ratio. 
D) only borrowed reserves.

Question 18

In the simple deposit expansion model,a decline in checkable deposits of $500 when the required reserve ratio is equal to 20 percent implies that the Fed

Accepted Answer

A) sold $250 in government bonds. 
B) sold $100 in government bonds. 
C) sold $50 in government bonds. 
D) purchased $100 in government bonds. 
A) sold $250 in government bonds. 
B) sold $100 in government bonds. 
C) sold $50 in government bonds. 
D) purchased $100 in government bonds.

Question 19

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

Accepted Answer

A) 0.01. 
B) 0.05. 
C) 0.15. 
D) 0.20. 
A) 0.01. 
B) 0.05. 
C) 0.15. 
D) 0.20.

Question 20

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

Accepted Answer

A) remains unchanged; decrease 
B) remains unchanged; increase 
C) decreases; decrease 
D) decreases; remains unchanged 
A) remains unchanged; decrease 
B) remains unchanged; increase 
C) decreases; decrease 
D) decreases; remains unchanged

Exam 14: The Money Supply Process

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

If reserves in the banking system increase by $200,then checkable deposits will increase by $500 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 $100 in the simple model of deposit creation when the required reserve ratio is

When the Fed sells $100 worth of bonds to First National Bank,reserves in the banking system

The monetary base minus reserves equals

If the required reserve ratio is 10 percent,the simple deposit multiplier is

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.

An increase in the nonborrowed monetary base,everything else held constant,will cause

When a bank sells a government bond to the Federal Reserve,reserves in the banking system ________ and the monetary base ________,everything else held constant.

For which of the following is the change in reserves necessarily different from the change in the monetary base?

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

The sum of the Fed's monetary liabilities and the U.S.Treasury's monetary liabilities is called

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 M1 money multiplier is

Everything else held constant,a decrease in the currency ratio causes the M1 money multiplier to ________ and the money supply to ________.

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

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

In the simple deposit expansion model,a decline in checkable deposits of $500 when the required reserve ratio is equal to 20 percent implies that the Fed

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

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

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory,inflation and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

When a bank sells a government bond to the Federal Reserve,reserves in the banking system and the monetary base ,everything else held constant.

Everything else held constant,a decrease in the currency ratio causes the M1 money multiplier to and the money supply to .

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