Exam 14: The Money Supply Process

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

Assuming initially that r = 15%,c = 40%,and e = 5%,an increase in e to 10% causes the M1 money multiplier to ________,everything else held constant.

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

The amount of borrowed reserves is ________ related to the discount rate,and is ________ related to the market interest rate.

In the simple deposit expansion model,a decline in checkable deposits of $500 when the required reserve ratio is equal to 20 percent implies that the Fed

If the required reserve ratio is one-third,currency in circulation is $300 billion,and checkable deposits are $900 billion,then the level of excess reserves in the banking system is

Suppose that from a new checkable deposit,First National Bank holds eight million dollars on deposit with the Federal Reserve,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.

The two most important categories of assets on the Fed's balance sheet are ________ and ________ because they earn interest.

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

All else the same,when the Fed calls in a $100 discount loan previously extended to the First National Bank,reserves in the banking system

Both ________ and ________ are monetary liabilities of the Fed.

Subtracting borrowed reserves from the monetary base obtains

When a bank buys a government bond from the Federal Reserve,reserves in the banking system ________ and the monetary base ________,everything else held constant.

If the required reserve ratio is 10 percent,currency in circulation is $400 billion,checkable deposits are $800 billion,and excess reserves total $0.8 billion,then the money supply is ________ billion.

When a bank sells a government bond to the Federal Reserve,reserves in the banking system ________ and the monetary base ________,everything else held constant.

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

Assuming initially that r = 10%,c = 40%,and e = 0,a decrease in r to 5% causes the M1 money multiplier to ________,everything else held constant.

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

The relationship between borrowed reserves,the nonborrowed monetary base,and the monetary base is

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