Exam 17: The Central Bank Balance Sheet and the Money Supply Process

If M = the quantity of money, m the money multiplier, MB the Monetary Base, C = Currency, D = Deposits, R = Reserves, RR equals required reserves, rD = the required reserve rate and ER = Excess reserves, then RR/D would equal the:

Explain why the Fed making more discount loans to banks, or an open market purchase, or an increase in foreign exchange reserves all have the same effect on its balance sheet.What is that effect on the monetary base?

Traveler's checks have no reserve requirements and are included in M1.When people travel during the summer and convert some of their checking account deposits into traveler's checks, explain what happens to the monetary base.

Follow a $1 billion purchase of U.S.Treasury bonds by the Fed from commercial banks.Discuss the changes that occur to the balance sheet of the banking system and the balance sheet of the Fed.

One thing the Fed has learned over the past twenty-five years is:

The assets that appear on the central bank's balance sheet include the category of loans.Who are central banks lending to and are these loans associated with the central bank functioning as the government's bank? Explain.

Assume that the required reserve rate is ten percent, banks want to hold excess reserves in an amount that equals three percent of deposits, and the public withdraws ten percent of every deposit in cash.An open market purchase of $1 million by the Fed will see banking system deposits increase by:

The money multiplier is much lower today than it was twenty-five years ago because:

For the Federal Reserve, the largest liability on its balance sheet is:

Given the prevalence of electronic payment mechanisms like credit cards and debit cards and the safety of checks, why is the amount of currency in the hands of the public increasing?

Harry gets $1000 in currency from his grandfather when he graduates from college.He deposits these funds into his checking account.What is the impact on the monetary base of Harry's deposit?

If M = the quantity of money, m the money multiplier, MB the Monetary Base, C = Currency, D = Deposits, R = Reserves, RR equals required reserves, rD = the required reserve rate and ER = Excess reserves, then C + D would equal:

When the Federal Reserve purchases a U.S.Treasury bond for $1 million by writing a check, when the check returns, the Fed's balance sheet will show:

If Bank A sells a $100,000 U.S.Treasury bond to the Fed, Bank A's excess reserves will:

Consider a $2 billion open market purchase of U.S.Treasury securities by the Federal Reserve.The Banking System's balance sheet will specifically show:

A customer of Bank A writes a $20,000 check for a new car, which the car dealer deposits in his bank, Bank B)Which of the following statements pertaining to this transaction is most true?

If the Federal Reserve is to be independent, the quantity of securities it purchases is determined by:

If M = the quantity of money, m the money multiplier, MB the Monetary Base, C = Currency, D = Deposits, R = Reserves, RR = required reserves, and ER = excess reserves, then m would equal:

In the U.S., loans made by Federal Reserve to banks fall in the categories of:

When a business purchases a $25,000 computer system by writing a check, the business's balance sheet will: