Exam 16: The Money Supply Process

Assume that no banks hold excess reserves,and the public holds no currency.If a bank sells a $100 security to the Bank of Canada,explain what happens to this bank and two additional steps in the deposit expansion process,assuming a 10 percent reserve requirement.How much do deposits and loans increase for the banking system when the process is completed?

When a member of the nonbank public deposits currency into her bank account,________.

When banks borrow money from the Bank of Canada,these funds are called ________.

If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 10 percent,then the bank has actual reserves of ________.

When the Bank of Canada buys $100 worth of bonds from First National Bank,reserves in the banking system ________.

When the monetary base is equal to $200 billion,the desired reserve ratio is 0.10 and the currency ratio is equal to 0.20,the money multiplier is equal to ________ and the money supply is equal to ________.

Which of the following are not liabilities on the Bank's balance sheet?

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

For which of the following is the change in reserves necessarily different from the change in the monetary base?

A simple deposit multiplier equal to two implies a desired reserve ratio equal to ________.

In the early 1930s,the currency ratio in the United States rose,as did the level of excess reserves.Money supply analysis predicts that,all else constant,the money supply should have ________.

The monetary base minus currency in circulation equals ________.

When the nonborrowed monetary base is equal to $200 billion,the borrowed reserves are equal to $100 billion,and the money supply is equal to $700 billion,the money multiplier is ________.

High-powered money minus reserves equals ________.

An increase in ________ leads to an equal ________ in the monetary base in the short run.

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

During the bank panics of the Great Depression the excess reserve ratio ________.

If a member of the nonbank public purchases a government bond from the Bank of Canada in exchange for currency,the monetary base will ________,but reserves will ________.

A simple deposit multiplier equal to one implies a desired reserve ratio equal to ________.

Which of the following are not assets on the Bank's balance sheet?