Exam 14: The Money Supply Process

Explain the complete formula for the M1 money supply,and explain how changes in required reserves,excess reserves,the currency ratio,the nonborrowed base,and borrowed reserves affect the money supply.

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

Subtracting borrowed reserves from the monetary base obtains

Everything else held constant,an increase in the excess reserves ratio causes the M1 money multiplier to ________ and the money supply to ________.

When the Fed purchases artwork to decorate the conference room at the Federal Reserve Bank of Kansas City

The total amount of reserves in the banking system is equal to the ________ required reserves and excess reserves.

When the Fed supplies the banking system with an extra dollar of reserves,deposits ________ by ________ than one dollar-a process called multiple deposit creation.

The steepest increase in the currency ratio since 1892 occurred during

During the bank panics of the Great Depression the currency ratio

If the required reserve ratio is 15 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.

When the Fed supplies the banking system with an extra dollar of reserves,deposits increase by more than one dollar-a process called

If a bank has excess reserves of $5,000 and demand deposit liabilities of $80,000,and if the reserve requirement is 20 percent,then the bank has actual reserves of

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

If the Fed injects reserves into the banking system and they are held as excess reserves,then the money supply

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?

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 currency-deposit ratio is

If reserves in the banking system increase by $100,then checkable deposits will increase by $1,000 in the simple model of deposit creation when the required reserve ratio is

Explain why the simple deposit multiplier overstates the true deposit multiplier.

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