Exam 16: The Money Supply Process

If the desired reserve ratio is ten percent,currency in circulation is $400 billion,chequable deposits are $800 billion,and excess reserves total $0.8 billion,then the currency ratio is ________.

In the simple deposit expansion model,a decline in chequable deposits of $1,000 when the desired reserve ratio is equal to 10 percent implies that the Bank of Canada ________.

If reserves in the Bank of Canada increase by $100,then chequable deposits will increase by $400 in the simple model of deposit creation when the desired reserve ratio is ________.

If a bank has excess reserves of $10,000 and demand deposit liabilities of $80,000,and if the reserve requirement is 20 percent,then the bank has actual reserves of ________.

Who are the three players in the money supply process? Describe their roles.

When the Bank of Canada purchases artwork to decorate its conference room ________.

If the desired reserve ratio is ten percent,currency in circulation is $400 billion,chequable deposits are $1000 billion,and excess reserves total $1 billion,then the excess reserves-chequable deposit ratio is ________.

If the desired reserve ratio is ten percent,currency in circulation is $400 billion,chequable deposits are $1000 billion,and excess reserves total $1 billion,then the currency ratio is ________.

Everything else held constant,an increase in the money market fund ratio will mean ________ in the M2+ money multiplier and ________ in the M2+ money supply.

Everything else held constant,a decrease in the desired reserve ratio will mean ________.

Everything else held constant,an increase in the excess reserve ratio will mean ________ in the M2+ money multiplier and ________ in the M2+ money supply.

The equation that represents M2+ in the model of the money supply process is ________.

If reserves in the banking system increase by $200,then chequable deposits will increase by $500 in the simple model of deposit creation when the desired reserve ratio is ________.

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

Everything else held constant,an increase in the required reserve ratio will mean ________ in the M2+ money multiplier and ________ in the M2+ money supply.

If the desired reserve ratio is ten percent,currency in circulation is $400 billion,and chequable deposits are $1000 billion,then the money multiplier is approximately ________.

In the simple deposit expansion model,if the Bank of Canada purchases $100 worth of bonds from a bank that previously had no excess reserves,deposits in the banking system can potentially increase by ________.

The effect of an open market purchase on reserves differs depending on how the seller of the bonds keeps the proceeds.If the proceeds are kept in ________,the open market purchase has no effect on reserves; if the proceeds are kept as ________,reserves increase by the amount of the open market purchase.

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

If the desired reserve ratio is ten percent,currency in circulation is $400 billion,chequable deposits are $1000 billion,and excess reserves total $1 billion,then the money supply is ________.