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

Why is it more correct to say that the Fed (the central bank) controls the monetary base than to say it controls the amount of reserves?

Considering changes to the monetary base, are discount loans and federal funds borrowing equivalent? Explain.

Suppose a student writes a check in the amount of $300 to the college bookstore for textbooks. Discuss briefly the impact on the student's balance sheet, his/her bank's balance sheet and the balance sheet of the Fed.

Follow a $1 billion purchase of U.S. Treasury bonds by the Fed from commercial banks. Discuss the changes that occur to the balance sheet of the banking system and the balance sheet of the Fed.

Traveler's checks have no reserve requirements and are included in M1. When people travel during the summer and convert some of their checking account deposits into traveler's checks, explain what happens to the monetary base.

When a business purchases a $25,000 computer system by writing a check, the business's balance sheet will:

The money multiplier is much lower today than it was twenty-five years ago because:

Explain why the Fed making more discount loans to banks, or an open market purchase, or an increase in foreign exchange reserves all have the same effect on its balance sheet. What is that effect on the monetary base?

As a portion of total assets measured in billions of dollars, the most important asset on the Fed's balance sheet is:

If the Fed sells euros valued at $100 million to commercial banks, will this change the size of the Fed's liabilities and assets? Explain.

When the Fed makes a discount loan, the impact on the Banking System's balance sheet will reflect:

An open market sale of U.S. Treasury securities by the Fed will cause the Banking System's balance sheet to show:

Bonds issued by a foreign government in its own currency would:

An open market sale of U.S. Treasury securities by the Fed will cause the Fed's balance sheet to show:

Over the two-year period during which the financial crisis occurred, the amount of assets in the Federal Reserve balance sheet increased by:

What was the main reason the Fed stopped announcing growth targets for money aggregates in the early 2000s?

Assume that the required reserve rate is ten percent, banks want to hold excess reserves in an amount that equals three percent of deposits, and the public withdraws ten percent of every deposit in cash. An open market purchase of $1 million by the Fed will see banking system deposits increase by:

During the early years of the Great Depression, the monetary base and M2:

A customer of Bank A writes a $20,000 check for a new car, which the car dealer deposits in his bank, Bank B. Which of the following statements pertaining to this transaction is most true?

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