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Exam 17: The Money Supply Process

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Question 51

Multiple Choice

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Part of the increase in currency holdings in the 1960s and 1970s can be attributed to

A) increases in income tax rates.
B) the switch from progressive to proportional income taxes.
C) the adoption of regressive taxes.
D) bracket creep due to inflation and progressive income taxes.

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Question 52

Multiple Choice

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There are two ways in which the Fed can provide additional reserves to the banking system: it can ________ government bonds or it can ________ discount loans to commercial banks.

A) sell;extend
B) sell;call in
C) purchase;extend
D) purchase;call in

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Question 53

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If reserves in the banking system increase by $100,then checkable deposits will increase by $667 in the simple model of deposit creation when the required reserve ratio is

In the simple deposit expansion model,a decline in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the Fed

If reserves in the banking system increase by $100,then checkable deposits will increase by $100 in the simple model of deposit creation when the required reserve ratio is

Everything else held constant,if the sum of the required reserve ratio and the excess reserve ratio is less than one,an increase in the currency-deposit ratio causes the M1 money multiplier to ________ and the money supply to ________.

The M2 money multiplier is

Models describing the determination of the money supply and the Fed's role in this process normally focus on ________ rather than ________,since Fed actions have a more predictable effect on the former.

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 excess reserves-checkable deposit ratio is

The money supply is ________ related to the nonborrowed monetary base,and ________ related to the level of borrowed reserves.

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

Which of the following are NOT liabilities on the Fed's balance sheet?

The monetary liabilities of the Federal Reserve include

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

During the 2007-2009 financial crisis the currency ratio

During the 2007-2009 financial crisis the excess reserve ratio

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 monetary base is

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

A bank has excess reserves of $1,000 and demand deposit liabilities of $80,000 when the reserve requirement is 20 percent.If the reserve requirement is lowered to 10 percent,the bank's excess reserves will be

In the model of the money supply process,the depositor's role in influencing the money supply is represented by