Question 1

The M2 money supply is represented by

Accepted Answer

A)  $ \mathrm{M} 2=\frac{1+\mathrm{c}+\mathrm{t}+\mathrm{mm}}{\mathrm{rr}+\mathrm{e}+\mathrm{c}} \times \mathrm{MB} $. 
B)  $ \mathrm{M} 2=\frac{1+\mathrm{c}+\mathrm{t}+\mathrm{mm}}{\mathrm{rr}+\mathrm{e}+\mathrm{c}} \times \frac{1}{\mathrm{MB}} $. 
C)  $ \mathrm{MB}=\frac{1+\mathrm{c}+\mathrm{t}+\mathrm{mm}}{\mathrm{rr}+\mathrm{e}+\mathrm{c}} \times \mathrm{M} 2 $. 
D)  $ \mathrm{MB}=\frac{\mathrm{rr}+\mathrm{e}+\mathrm{c}}{1+\mathrm{c}+\mathrm{t}+\mathrm{mm}} \times \frac{1}{\mathrm{M} 2} $. 
A)  $ \mathrm{M} 2=\frac{1+\mathrm{c}+\mathrm{t}+\mathrm{mm}}{\mathrm{rr}+\mathrm{e}+\mathrm{c}} \times \mathrm{MB} $. 
B)  $ \mathrm{M} 2=\frac{1+\mathrm{c}+\mathrm{t}+\mathrm{mm}}{\mathrm{rr}+\mathrm{e}+\mathrm{c}} \times \frac{1}{\mathrm{MB}} $. 
C)  $ \mathrm{MB}=\frac{1+\mathrm{c}+\mathrm{t}+\mathrm{mm}}{\mathrm{rr}+\mathrm{e}+\mathrm{c}} \times \mathrm{M} 2 $. 
D)  $ \mathrm{MB}=\frac{\mathrm{rr}+\mathrm{e}+\mathrm{c}}{1+\mathrm{c}+\mathrm{t}+\mathrm{mm}} \times \frac{1}{\mathrm{M} 2} $.

Question 2

Everything else held constant,an increase in the time deposit ratio will result in ________ in the M1 money multiplier and ________ in the M2 money multiplier.

Accepted Answer

A) an increase;an increase 
B) no change;an increase 
C) a decrease;a decrease 
D) no change;a decrease 
A) an increase;an increase 
B) no change;an increase 
C) a decrease;a decrease 
D) no change;a decrease

Question 3

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 4

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

Question 5

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

Accepted Answer

A) risen. 
B) fallen. 
C) remain unchanged. 
D) either risen,fallen,or remain unchanged. 
A) risen. 
B) fallen. 
C) remain unchanged. 
D) either risen,fallen,or remain unchanged.

Question 6

In the simple deposit expansion model,an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 10 percent implies that the Fed

Accepted Answer

A) sold $1,000 in government bonds. 
B) sold $100 in government bonds. 
C) purchased $1000 in government bonds. 
D) purchased $100 in government bonds. 
A) sold $1,000 in government bonds. 
B) sold $100 in government bonds. 
C) purchased $1000 in government bonds. 
D) purchased $100 in government bonds.

Question 7

Assuming initially that the required reserve ratio = 10%,the currency-deposit ratio = 75%,and the excess reserve ratio = 156%,an increase in the excess reserve ratio to 200% causes the M1 money multiplier to ________,everything else held constant.

Accepted Answer

A) increase from 0.15 to 0.33 
B) decrease from 0.73 to 0.61 
C) increase from 0.54 to 0.67 
D) decrease from 1.67 to 1.54 
A) increase from 0.15 to 0.33 
B) decrease from 0.73 to 0.61 
C) increase from 0.54 to 0.67 
D) decrease from 1.67 to 1.54

Question 8

Assuming initially that the required reserve ratio = 10%,the currency-deposit ratio = 75%,and the excess reserve ratio = 156%,an increase in the currency-deposit ratio to 150% causes the M1 money multiplier to ________,everything else held constant.

Accepted Answer

A) increase from 0.73 to 0.78 
B) decrease from 0.73 to 0.61 
C) increase from 1.54 to 1.67 
D) decrease from 1.67 to 1.54 
A) increase from 0.73 to 0.78 
B) decrease from 0.73 to 0.61 
C) increase from 1.54 to 1.67 
D) decrease from 1.67 to 1.54

Question 9

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

Accepted Answer

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

Question 10

In the simple deposit expansion model,if the Fed extends a $100 discount loan to a bank that previously had no excess reserves,deposits in the banking system can potentially increase by

Accepted Answer

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

Question 11

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 ________.

Accepted Answer

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

Question 12

The volume of loans that the Fed makes to banks is affected by the Fed's setting of the interest rate on these loans,called the

Accepted Answer

A) federal funds rate. 
B) prime rate. 
C) discount rate. 
D) interbank rate. 
A) federal funds rate. 
B) prime rate. 
C) discount rate. 
D) interbank rate.

Question 13

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

Accepted Answer

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

Question 14

If the Fed decides to reduce bank reserves,it can

Accepted Answer

A) purchase government bonds. 
B) extend discount loans to banks. 
C) sell government bonds. 
D) print more currency. 
A) purchase government bonds. 
B) extend discount loans to banks. 
C) sell government bonds. 
D) print more currency.

Question 15

When the Federal Reserve extends a discount loan to a bank,the monetary base ________ and reserves ________.

Accepted Answer

A) remains unchanged;decrease 
B) remains unchanged;increase 
C) increases;increase 
D) increases;remain unchanged 
A) remains unchanged;decrease 
B) remains unchanged;increase 
C) increases;increase 
D) increases;remain unchanged

Question 16

In the simple deposit expansion model,a decline in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the Fed

Accepted Answer

A) sold $200 in government bonds. 
B) sold $500 in government bonds. 
C) purchased $200 in government bonds. 
D) purchased $500 in government bonds. 
A) sold $200 in government bonds. 
B) sold $500 in government bonds. 
C) purchased $200 in government bonds. 
D) purchased $500 in government bonds.

Question 17

Everything else held constant,if the sum of the required reserve ratio and the excess reserve ratio is less than one,a decrease in the currency-checkable deposit ratio will mean

Accepted Answer

A) an increase in currency in circulation and an increase in the money supply. 
B) an increase in money supply. 
C) a decrease in the money supply. 
D) an increase in currency in circulation but no change in the money supply. 
A) an increase in currency in circulation and an increase in the money supply. 
B) an increase in money supply. 
C) a decrease in the money supply. 
D) an increase in currency in circulation but no change in the money supply.

Question 18

If reserves in the banking system increase by $100,then checkable deposits will increase by $1000 in the simple model of deposit creation when the required reserve ratio is

Accepted Answer

A) 0.01. 
B) 0.10. 
C) 0.05. 
D) 0.20. 
A) 0.01. 
B) 0.10. 
C) 0.05. 
D) 0.20.

Question 19

The interest rate the Fed charges banks borrowing from the Fed is the

Accepted Answer

A) federal funds rate. 
B) Treasury bill rate. 
C) discount rate. 
D) prime rate. 
A) federal funds rate. 
B) Treasury bill rate. 
C) discount rate. 
D) prime rate.

Question 20

If the required reserve ratio is equal to 10 percent,a single bank can increase its loans up to a maximum amount equal to

Accepted Answer

A) its excess reserves. 
B) 10 times its excess reserves. 
C) 10 percent of its excess reserves. 
D) its total reserves. 
A) its excess reserves. 
B) 10 times its excess reserves. 
C) 10 percent of its excess reserves. 
D) its total reserves.

Exam 14: The Money Supply Process

The M2 money supply is represented by

Everything else held constant,an increase in the time deposit ratio will result in ________ in the M1 money multiplier and ________ in the M2 money multiplier.

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 ________.

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

In the simple deposit expansion model,an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 10 percent implies that the Fed

Assuming initially that the required reserve ratio = 10%,the currency-deposit ratio = 75%,and the excess reserve ratio = 156%,an increase in the excess reserve ratio to 200% causes the M1 money multiplier to ________,everything else held constant.

Assuming initially that the required reserve ratio = 10%,the currency-deposit ratio = 75%,and the excess reserve ratio = 156%,an increase in the currency-deposit ratio to 150% causes the M1 money multiplier to ________,everything else held constant.

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

In the simple deposit expansion model,if the Fed extends a $100 discount loan to a bank that previously had no excess reserves,deposits in the banking system can potentially increase by

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 ________.

The volume of loans that the Fed makes to banks is affected by the Fed's setting of the interest rate on these loans,called the

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

If the Fed decides to reduce bank reserves,it can

When the Federal Reserve extends a discount loan to a bank,the monetary base ________ and reserves ________.

In the simple deposit expansion model,a decline in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the Fed

Everything else held constant,if the sum of the required reserve ratio and the excess reserve ratio is less than one,a decrease in the currency-checkable deposit ratio will mean

If reserves in the banking system increase by $100,then checkable deposits will increase by $1000 in the simple model of deposit creation when the required reserve ratio is

The interest rate the Fed charges banks borrowing from the Fed is the

If the required reserve ratio is equal to 10 percent,a single bank can increase its loans up to a maximum amount equal to

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of 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

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

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

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

Filters

Everything else held constant,an increase in the time deposit ratio will result in in the M1 money multiplier and in the M2 money multiplier.

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

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 .

When the Federal Reserve extends a discount loan to a bank,the monetary base and reserves .