Exam 14: The Money Supply Process

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?

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

Decisions by ________ about their holdings of currency and by ________ about their holdings of excess reserves affect the money supply.

An increase in the monetary base that goes into ________ is not multiplied,while an increase that goes into ________ is multiplied.

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

When an individual sells a $100 bond to the Fed,she may either deposit the check she receives or cash it for currency.In both cases

A bank has excess reserves of $6,000 and demand deposit liabilities of $100,000 when the required reserve ratio is 20 percent.If the reserve ratio is raised to 25 percent,the bank's excess reserves will be

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

Explain two reasons why the Fed does not have complete control over the level of bank deposits and loans.Explain how a change in either factor affects the deposit expansion process.

The total amount of required reserves in the banking system is equal to the ________ the required reserve ratio and checkable deposits.

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

Assuming initially that rr = 10%,c = 40%,and e = 0,an increase in rr to 15% causes the M1 money multiplier to ________,everything else held constant.

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

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

The steepest increase in the currency ratio since 1892 occurred during

During the 2007-2009 financial crisis the excess reserve ratio

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

A Fed purchase of gold,SDRs,a deposit denominated in a foreign currency or any other asset is just an open market ________ of these assets,________ the monetary base.

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

The money multiplier is