Exam 17: The Central Bank Balance Sheet and the Money Supply Process

If M = the quantity of money, m the money multiplier, MB the Monetary Base, C = Currency, D = Deposits, R = Reserves, RR = required reserves, and ER = excess reserves, then m would equal:

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Question 1

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A central bank's sale of securities from its portfolio will:

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Question 2

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You are given the following information: Reserves (R) in the banking system amount to $48 billion, of which $45.8 billion are required. Currency in the hands of the public amounts to $692.5 billion while checkable deposits amount to $650 billion. Calculate the money multiplier.

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Question 3

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We can answer this one by using the following formula:
$m=\frac{1+C / D}{r_{D}+r_{E}+C / D}$
We need to calculate C/D, this we can obtain by using information given in the question. C =$692.5 (we'll leave off the billions) and D = $650; so C/D = $692.5/$650 = 1.065. Next we'll calculate rD which can be found by rD = RR/D where RR represents the required reserves. rD =$45.8/$650 or 0.07; Next we can find rE by first determining the amount in excess reserves, ER. ER = R - RR or ER = $48- $45.8 = $2.2. rE = ER/D = $2.2/$650 = 0.0033. We have all of the values we need to solve for m. Substituting the values we obtained into the equation above, we find that m = 2.065/1.138 or m = 2.35.

A central bank holds foreign exchange reserves for:

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Question 4

What happens to the monetary base if people, fearing a bank run, convert their checking deposits into currency holdings?

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Question 5

Total banking system reserves equal $58.65 billion. The total banking system checkable deposits subject to reserve requirements are $510 billion. The required reserves are $51 billion. What is the required reserve rate, and what is the excess reserve rate?

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Question 6

During the 2007-2009 financial crisis which of the following temporarily became the largest component of assets on the Fed's balance sheet:

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Question 7

If the Fed were to increase the required reserve rate from ten percent to twenty percent, the simple deposit expansion multiplier would:

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Question 8

A central bank's purchase of securities made by writing checks on itself will:

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Question 9

Mary decides to withdraw $500 out of her checking account. The impact of this transaction on the Banking System's balance sheet will be to:

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Question 10

Tom decides to withdraw $300 out of his checking account. The impact of this transaction on the Fed's balance sheet will be:

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Question 11

The most a bank could lend at any time without altering its assets is an amount equal to its:

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Question 12

Vault cash is not included in the central bank's liability category of currency because:

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Question 13

If the Federal Reserve is to be independent, then the quantity of securities it purchases is determined by:

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Question 14

If Bank A sells a $100,000 U.S. Treasury bond to the Fed, Bank A's excess reserves will:

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Question 15

Most responsible central banks publish their balance sheet:

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Question 16

The formula for required reserves is:

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Question 17

To obtain a discount loan from the Fed, a commercial bank must:

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Question 18

When an individual withdraws funds from a checking account the:

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Question 19

The Fed purchases German bonds from commercial banks. Which of the following best describes the impact on the Fed's and the Banking System's balance sheets resulting from this transaction?

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Question 20

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Exam 17: The Central Bank Balance Sheet and the Money Supply Process

If M = the quantity of money, m the money multiplier, MB the Monetary Base, C = Currency, D = Deposits, R = Reserves, RR = required reserves, and ER = excess reserves, then m would equal:

A central bank's sale of securities from its portfolio will:

You are given the following information: Reserves (R) in the banking system amount to $48 billion, of which $45.8 billion are required. Currency in the hands of the public amounts to $692.5 billion while checkable deposits amount to $650 billion. Calculate the money multiplier.

A central bank holds foreign exchange reserves for:

What happens to the monetary base if people, fearing a bank run, convert their checking deposits into currency holdings?

Total banking system reserves equal $58.65 billion. The total banking system checkable deposits subject to reserve requirements are $510 billion. The required reserves are $51 billion. What is the required reserve rate, and what is the excess reserve rate?

During the 2007-2009 financial crisis which of the following temporarily became the largest component of assets on the Fed's balance sheet:

If the Fed were to increase the required reserve rate from ten percent to twenty percent, the simple deposit expansion multiplier would:

A central bank's purchase of securities made by writing checks on itself will:

Mary decides to withdraw $500 out of her checking account. The impact of this transaction on the Banking System's balance sheet will be to:

Tom decides to withdraw $300 out of his checking account. The impact of this transaction on the Fed's balance sheet will be:

The most a bank could lend at any time without altering its assets is an amount equal to its:

Vault cash is not included in the central bank's liability category of currency because:

If the Federal Reserve is to be independent, then the quantity of securities it purchases is determined by:

If Bank A sells a $100,000 U.S. Treasury bond to the Fed, Bank A's excess reserves will:

Most responsible central banks publish their balance sheet:

The formula for required reserves is:

To obtain a discount loan from the Fed, a commercial bank must:

When an individual withdraws funds from a checking account the:

The Fed purchases German bonds from commercial banks. Which of the following best describes the impact on the Fed's and the Banking System's balance sheets resulting from this transaction?

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

Monetary Policy: Stabilizing the Domestic Economy

Exchange Rate Policy and the Central Bank

Money Growth, Money Demand and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

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