Exam 15: The Money Supply Process

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

Explain the complete formula for the money supply, and explain how changes in desired reserves, excess reserves, the currency ratio, the nonborrowed base, and Bank of Canada lending affect the money supply.

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 excess reserves-chequable deposit ratio is ________.

If reserves in the banking system increase by $100, then chequable deposits will increase by $2000 in the simple model of deposit creation when the desired reserve ratio is ________.

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 ________.

Suppose a person cashes his payroll cheque and holds all the funds in the form of currency. Everything else held constant, total reserves in the banking system ________ and the monetary base ________.

Explain two reasons why the Bank of Canada 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 three players in the money supply process include ________.

Everything else held constant, an increase in currency holdings will cause ________.

Decisions by depositors to increase their holdings of ________, or of banks to hold excess reserves will result in a ________ expansion of deposits than the simple model predicts.

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

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

The M2+ money multiplier is ________.

In the model of the money supply process, the Bank of Canada's role in influencing the money supply is represented by ________.

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

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

If the desired reserve ratio is fifteen 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 banking system has excess reserves of $75, and the desired reserve ratio is 20 percent, the potential expansion of chequable deposits is ________.

During the Great Depression ________.

If a person selling bonds to the Bank of Canada cashes the Bank's cheque, then reserves ________ and currency in circulation ________, everything else held constant.