Money and Banking Exam 2 Study Guide Ch. 14
In the simple deposit expansion model, if the Fed purchases $100 worth of bonds from a bank that previously had no excess reserves, the bank can now increase its loans by
$100 (these are $$ not from deposit)
In the simple deposit expansion model, if the Fed purchases $100 worth of bonds from a bank that previously had no excess reserves, deposits in the banking system can potentially increase by
$100 times the reciprocal of the required 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 money supply is ____ billion
$1200 MS = C + D
**If M1 money multiplier is 2.5, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the monetary base is
$480 MB = C + R R= (RR + ER)
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 ____
.001 e= excess reserves/deposits
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 currency ratio is ____
0.50 c = Currency/Deposits
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 M1 money multiplier is ____
2.5 m = 1+c/c+r+e
In the model of the money supply process, the bank's role in influencing the money supply process is represented by
The excess reserve and borrowed reserve
Everything else held constant, an increase in the currency-checkable deposit ratio will mean
a decrease in the money supply
When a member of the nonbank public withdraws currency from her bank account,
bank reserves fall, but the monetary base remains unchanged
The three players in the money supply process include
banks, depositors, and the central bank
The monetary liabilities of the Federal Reserve include
currency in circulation and reserves
If a member of the nonbank public purchases a government bond from the Federal Reserve in exchange for currency, the monetary base will ____, but reserves will _____
fall; remain unchanged
When the Federal Reserve purchases a government bond from a bank, reserves in the banking system _____ and the monetary base ______
increases; increases
The money supply is ____ related to the nonborrowed monetary base, and ____ related to the level of borrowed reserves
positively; positively
Both _____ and ______ are Federal Reserve assets
securities; loans to financial institutions
In the model of the money supply process, the depositor's role in influencing the money supply is represented by
the currency holdings
Everything else held constant, an increase in currency holdings will cause
the money supply to fall
Everything else held constant, an increase in the required reserve ratio on checkable deposit will cause
the money supply to fall
In the model of the money supply process, the Federal Reserve's role in influencing the money supply is represented by
the required reserve ratio, nonborrowed reserves, and borrowed reserves