ECO chap 29 sec 003 (69-107)

d

69. The manager of the bank where you work tells you that your bank has $5 million in excess reserves. She also tells you that the bank has $300 million in deposits and $255 million dollars in loans. Given this information you find that the reserve requirement must be a. 50/255. b. 40/255. c. 50/300. d. 40/300.

b

70. Suppose the banking system currently has $300 billion in reserves; the reserve requirement is 10 percent; and excess reserves amount to $3 billion. What is the level of deposits? a. $3,300 billion b. $2,970 billion c. $2,700 billion d. $2,673 billion

a

71. If you deposit $100 of currency into a demand deposit at a bank, this action by itself a. does not change the money supply. b. increases the money supply. c. decreases the money supply. d. has an indeterminate effect on the money supply.

c

72. When a bank loans out $1,000, the money supply a. does not change. b. decreases. c. increases. d. may do any of the above.

b

73. Under a fractional-reserve banking system, banks a. hold more reserves than deposits. b. generally lend out a majority of the funds deposited. c. cause the money supply to fall by lending out reserves. d. All of the above are correct.

c

74. If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply a. and wealth increase by $100. b. and wealth decrease by $100. c. increase by $100 while wealth does not change. d. decrease by $100 while wealth decreases by $100.

c

75. As the reserve ratio increases, the money multiplier a. increases. b. does not change. c. decreases. d. could do any of the above.

a

76. If the central bank in some country lowered the reserve requirement, then the money multiplier for that country a. would increase. b. would not change. c. would decrease. d. could do any of the above.

a

77. If the reserve ratio is 2.5 percent, then the money multiplier is a. 40. b. 25. c. 2.5. d. 1.25.

a

78. If the reserve ratio is 4 percent, then the money multiplier is a. 25. b. 20. c. 4. d. 2.

b

79. If the reserve ratio is 5 percent, then the money multiplier is a. 25. b. 20. c. 2.5. d. 1.25.

b

80. If the reserve ratio is 10 percent, the money multiplier is a. 100. b. 10. c. 9/10. d. 1/10.

b

81. If the reserve ratio is 12.5 percent, the money multiplier is a. 6.25. b. 8. c. 12.5. d. 25.

c

82. If the reserve ratio is 20 percent, the money multiplier is a. 2. b. 4. c. 5. d. 8.

c

83. If the reserve ratio increased from 10 percent to 20 percent, the money multiplier would a. rise from 10 to 20. b. rise from 5 to 10. c. fall from 10 to 5. d. not change.

b

84. If R represents the reserve ratio for all banks in the economy, then the money multiplier is a. 1/(1-R). b. 1/R. c. 1/(1+R). d. (1+R)/R.

b

85. The money multiplier equals a. 1/R, where R represents the quantity of reserves in the economy. b. 1/R, where R represents the reserve ratio for all banks in the economy. c. 1/(1+R), where R represents the reserve ratio for all banks in the economy. d. 1/(1+R), where R represents the largest reserve ratio among all banks in the economy.

d

86. If the reserve ratio for all banks is 5 percent, then $1,000 of additional reserves can create up to a. $5,500 of new money. b. $5,000 of new money. c. $4,000 of new money. d. None of the above is correct.

b

87. If the reserve ratio for all banks is 5 percent, then $2,500 of additional reserves can create up to a. $62,500 of new money. b. $50,000 of new money. c. $45,600 of new money. d. $37,500 of new money.

c

88. If the reserve ratio for all banks is 5 percent, then $1,000 of additional reserves can create up to a. $200 of new money. b. $2,000 of new money. c. $20,000 of new money. d. None of the above is correct.

c

89. If the reserve ratio for all banks is 8 percent, then an additional $1,000 of reserves can increase the money supply by as much as a. $6,400. b. $8,000. c. $12,500. d. $20,000.

c

90. If the reserve ratio for all banks is 10 percent, $1,000 of additional reserves can create up to a. $100 of new money. b. $1,000 of new money. c. $10,000 of new money. d. None of the above is correct.

c

91. If the reserve ratio for all banks is 8 percent, then $4,500 of additional reserves can create up to a. $4,500 of new money. b. $48, 913 of new money. c. $56,250 of new money. d. $75,000 of new money.

b

92. If the reserve ratio for all banks is 9 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as a. $60,000.00. b. $66,666.67. c. $90,900.00. d. $100,555.56.

b

93. If the reserve ratio for all banks is 12.5 percent, then $2,000 of additional reserves can create up to a. $8,000 of new money. b. $16,000 of new money. c. $32,000 of new money. d. None of the above is correct.

b

94. If the reserve ratio for all banks is 12.5 percent, then $1,000 of additional reserves can create up to a. $7,000 of new money. b. $8,000 of new money. c. $11,500 of new money. d. $12,500 of new money.

b

95. Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount? a. $55 million b. $50 million c. $45 million d. $40 million

b

96. In the nation of Feutschland, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is a. 29 percent. b. 22.5 percent. c. 16 percent. d. None of the above is correct.

b

97. In Hugoland, the money supply is $8 million and reserves are $1 million. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is a. 14 percent. b. 12.5 percent. c. 8 percent. d. None of the above is correct.

b

98. If the reserve ratio is 100 percent, then a new deposit of $500 into a bank account a. eventually increases the money supply by $500. b. leaves the size of the money supply unchanged. c. eventually decreases the size of the money supply by $500. d. None of the above is correct.

a

Scenario 29-1. The monetary policy of Salidiva is determined by the Salidivian Central Bank. The local currency is the salido. Salidivian banks collectively hold 100 million salidos of required reserves, 25 million salidos of excess reserves, 250 million salidos of Salidivian Treasury Bonds, and their customers hold 1,000 million salidos of deposits. Salidivians prefer to use only demand deposits and so the money supply consists of demand deposits. 100. Refer to Scenario 29-1. Assuming the only other item Salidivian banks have on their balance sheets is loans, what is the value of existing loans made by Salidivian banks? a. 625 million salidos b. 875 million salidos c. 1,125 million salidos d. None of the above is correct.

c

Scenario 29-1. The monetary policy of Salidiva is determined by the Salidivian Central Bank. The local currency is the salido. Salidivian banks collectively hold 100 million salidos of required reserves, 25 million salidos of excess reserves, 250 million salidos of Salidivian Treasury Bonds, and their customers hold 1,000 million salidos of deposits. Salidivians prefer to use only demand deposits and so the money supply consists of demand deposits. 101. Refer to Scenario 29-1. Suppose the Central Bank of Salidiva loaned the banks of Salidiva 5 million salidos. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Salidiva change? a. 60 million salidos b. 50 million salidos c. 40 million salidos d. None of the above is correct.

a

Scenario 29-1. The monetary policy of Salidiva is determined by the Salidivian Central Bank. The local currency is the salido. Salidivian banks collectively hold 100 million salidos of required reserves, 25 million salidos of excess reserves, 250 million salidos of Salidivian Treasury Bonds, and their customers hold 1,000 million salidos of deposits. Salidivians prefer to use only demand deposits and so the money supply consists of demand deposits. 102. Refer to Scenario 29-1 . Suppose the Central Bank of Salidiva purchases 25 million salidos of Salidivian Treasury Bonds from banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Salidiva change? a. 200 million salidos b. 150 million salidos c. 100 million salidos d. None of the above is correct.

c

Scenario 29-1. The monetary policy of Salidiva is determined by the Salidivian Central Bank. The local currency is the salido. Salidivian banks collectively hold 100 million salidos of required reserves, 25 million salidos of excess reserves, 250 million salidos of Salidivian Treasury Bonds, and their customers hold 1,000 million salidos of deposits. Salidivians prefer to use only demand deposits and so the money supply consists of demand deposits. 99. Refer to Scenario 29-1. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and what is the reserve ratio? a. 2 percent, 8 percent b. 8 percent, 10 percent c. 10 percent, 12.5 percent d. None of the above is correct.

c

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million Tazes of required reserves, 75 million Tazes of excess reserves, have issued 7,500 million Tazes of deposits, and hold 225 million Tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. 103. Refer to Scenario 29-2. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks? a. 5 percent, 8 percent b. 4 percent, 8 percent c. 4 percent, 5 percent d. None of the above is correct.

a

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million Tazes of required reserves, 75 million Tazes of excess reserves, have issued 7,500 million Tazes of deposits, and hold 225 million Tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. 104. Refer to Scenario 29-2. Assuming the only other thing Tazian banks have on their balance sheets is loans, what is the value of existing loans made by Tazian banks? a. 6,900 million Tazes b. 7,125 million Tazes c. 7,350 million Tazes d. None of the above is correct.

b

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million Tazes of required reserves, 75 million Tazes of excess reserves, have issued 7,500 million Tazes of deposits, and hold 225 million Tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. 105. Refer to Scenario 29-2. Suppose the Bank of Tazi loaned the banks of Tazi 10 million Tazes. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change? a. 250 million Tazes b. 200 million Tazes c. 125 million Tazes d. None of the above is correct.

b

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million Tazes of required reserves, 75 million Tazes of excess reserves, have issued 7,500 million Tazes of deposits, and hold 225 million Tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. 106. Refer to Scenario 29-2. Suppose the Bank of Tazi purchased 50 million Tazes of Tazian Treasury Bonds from the banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change? a. 625 million Tazes b. 1,000 million Tazes c. 1,250 million Tazes d. None of the above is correct.

a

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million Tazes of required reserves, 75 million Tazes of excess reserves, have issued 7,500 million Tazes of deposits, and hold 225 million Tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. 107. Refer to Scenario 29-2. Suppose that the Bank of Tazi changes the reserve requirement ratio to 3 percent. Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after the change in the reserve requirement ratio? a. 9,375 million Tazes b. 10,000 million Tazes c. 12,500 million Tazes d. None of the above is correct to the nearest million salidos.