AP Macro Unit 4 (quizziz)
A commercial bank holds $500,000 in demand deposit liabilities and $120,000 in reserves. If the required reserve ratio is 20 percent, which of the following is the maximum amount by which this single commercial bank and the maximum amount by which the banking system can increase loans? (amount created by single bank, amount created by banking system)
$20,000, $100,000
Suppose that all banks hold no excess reserves and the reserve requirement is 20%. If Paula deposits $200 she earned for babysitting in the bank, what is the maximum increase in the total money supply?
$800 (MM= 1/.20=5) (5 x 200= 1,000) (1,000-200= 800)
If the required reserve requirement is 10%, the Money Multiplier is?
10 (MM= 1/rr)
If the legal reserve requirement is 25 percent, the value of the simple deposit expansion multiplier is
4 (1/rr) (1/.25 =4)
Which of the following are true statements about the federal funds rate?
It is the interest rate that banks charge each other for short-term loans It is influenced by open market operations
Nominal GDP is represented in the equation of exchange as
PQ
A decrease in the supply of money will cause which of the following?
an increase in nominal interest rates
Which of the following actions by the Federal Reserve will result in an increase in banks' excess reserves?
buying bonds on the open market
Which of the following does the Federal Reserve use most often to combat a recession?
buying securities
To reduce inflation, the Federal Reserve could
contract the money supply in order to raise interest rates, which decreases investment
Which of the following represent a liability on a bank's balance statement
demand deposits
Which of the following is true regarding the balance sheet of a commercial bank?
demand deposits are considered a liability
A decrease in the mortgage rate will cause which of the following to happen in the loanable funds market?
demand will increase
The neutrality of money refers to the situation where
increases in the money supply eventually result in no change in real output
Banks may not be able to create the maximum amount of money from a new deposit as a result of
individuals holding a larger portion of their assets as cash
Which of the following is true regarding the federal funds rate?
it is the interest rate that banks charge each other
Suppose the Federal Reserve buys $400,000 worth of securities from the securities dealers on the open market. If the reserve requirement is 20 percent and the banks hold no excess reserves, what will happen to the total money supply?
it will EXPAND by $2,000,000
When an economy is at full-employment, an expansionary monetary policy will lead to
lower interest rates and more investment
When money is used as a standard of value, a person is
making price comparisons among products
Expansionary monetary policy results in which of the following in the short run?
money supply increases nominal interest rate decreases real interest rate decrease
The real interest rate the
nominal interest rate minus the expected inflation rate
All of the following are financial assets except
required reserves
Which of the following are assets on a banks balance sheet?
reserves and loans
Reserves, the money supply, and interest rates are most likely to change in which of the following ways when the Fed sells bonds?
reserves decrease money supply decreases interest rates increase
What will happen to the supply of loanable funds and the equilibrium interest rate if the Federal Reserve buys government securities
supply increases interest rate decrease
Aggregate demand and aggregate supply analysis suggest that, in the short run, an expansionary monetary policy will shift
the AD curve to the right
Which of the following is true for the money market graph?
there is an inverse relationship between the nominal interest rate and the quantity of money demanded
"The price for a ticket to the Super Bowl is $500." This statement best illustrates money used as a
unit of account
The Federal Reserve's (Central Bank) use of open market operations
will result in interest rates falling when the Fed buys bonds
