Money & Banking hw 4

a bank has excess reserves of $6,000and demand deposit liabilities of $100,000, when the required reserve ration is 20%. If the reserve ratio is raised to 25 percent, the bank's excess reserves will be

$1,000

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

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 supply is ____ billion

$1200

if the required reserve ratio is 10%, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $1billion, then the money supply is ___ billion

$1400

if a bank has excess reserves of $20,000 and demand deposit liabilities of $80,000 and if the reserve requirements is 20% then the bank has a total reserve of

$36,000

in the simple deposit expansion model, if the banking system has excess reserves of $75, and the required reserve ration is 20%, the potential expansion of checkable deposits is

$375

if reserves in the banking system increase by $100, then checkable deposits will increase by $1000 in the simple model of deposit creation when the required reserve ration

0.10

if reserves in the banking system increase by $100, then checkable deposits will increase by $400 in the simple model of deposit creation when the required reserve ratio

0.25

if the required reserve ratio is one-third, currency in circulation is $300 billion, and checkable deposits are $900 billion, then the currency ratio is

0.33

The three largest Federal Reserve banks (NY, Chicago, and San Francisco) combined hold more than ____ percent of the assets of the Federal Reserve System

50%

the relationship between borrowed reserves, the non borrowed monetary base, and the monetary base is

BR = MC - MBn

The Federal Reserve entity that makes decisions regarding the conduct of open market operations is the

Federal Open Market Committee

the ability of central bank to set monetary policy goals is

Goal independence

the equation that shows the amount of the monetary base needed to support existing levels of checkable deposits, excess reserves, and currency is

MD = (rr x D) + ER + C

The federal reserve bank of ________ plays a special role in the Federal Reserve System because it houses the open market desk

New York

The president from which Federal Reserve Bank always has a vote int eh Federal Open Market Committee

New York

Members of the Board of Governors are

appointed by the president of the United States and confirmed by the Senate

when a member of the nonbank public withdraws currency from her bank account,

bank reserves fall, but the monetary base remains unchanged

when a member of the nonbank public deposits currency into her bank account

bank reserves rise, but the monetary base remains unchanged

The three players in the money supply process include

banks, depositors, and the central bank

both _____ and _____ are monetary liabilities of the Fed

currency in circulation: reserves

an increase int eh monetary base that goes into ____ is not multiplied, while an increase that goes into ____ is multiplied

currency, deposits

the effect of an open market purchase on reserves differs depending on how the seller of the bonds keeps the proceeds. If the proceeds are kept in ____, the open market purchases has no effect on reserves: if the proceeds are kept as ___, reserves increase by the amount of the open market purchase

currency, deposits

decisions by depositors to increase their holding of ____, or of banks to hold ____ will result in a smaller expansion of deposits than the simple model predicts

currency; excess reserves

the formula for the simple deposit multiplier can be expressed as

dD = (1/rr) x dR

all else the same, when the Fed calls in a $100 discount loan previously extended to the First National Bank, reserves in the banking system

decrease by $100

assuming initially that rr=10%, c=40%, and e=0 an increase in rr to 15% causes the M1 money multiplier to ___ , everything else held constand

decrease from 2.8 to 2.55

everything else held constant, an increase in the required reserve ratio on checkable deposits cause the M1 money multiplier to __ and the money supply to __

decrease, decreaes

when the federal reserve sells a government bond to a bank, reserves in the banking system ____ and the monetary base ____, everything else held constant

decrease, decrease

suppose a person cashes his payroll check and holds all the funds int eh form of currency, everything else held constant, total reserves in the banking system ___ and the monetary base ______

decrease; remains unchanged

the interest rate the Fed charges banks borrowing from the Fed is the

discount rate

total reserves are the sum of ____ and _____

excess reserves: required reserves

the political business cycle refers to the phenomenon that just before elections, politicians enact ____ policies. After the elections, the bad effects of these policies (for example, ____) have to be counteracted with ____ policies

expansionary, a higher inflation rate, contractionary

when an individual sells a $100 bond to the Fed, she may either deposit the check she receives or cash it for currency. In both cases

high-powered money increases

assuming initially that rr = 15%, c=40%, and e=5% a decrease in e to -% causes the M1 money multiplier to ____, everything else held constant

increase from 2.33 to 2.55

when the federal reserve purchases a government bond from a bank, reserves in the banking system ____ and the monetary base ___, everything else held constant

increase, increase

if the fed injects reserves into the banking system and they are held as excess reserves, then the monetary base ___ and the money supply ____

increases; remains unchanged

suppose that from a new checkable deposit, First national bank hold two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and one million dollars in required reserves. Given this info, we can say First National Bank has ____ million dollars in excess reserves

nine

members of congress are able to influence monetary policy, albeit indirectly, through their ability to

propose legislation that would force the Fed to submit budget requests to Congress, as must other government agencies

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

purchase; extend

the monetary base minus currency in circulation equals

reserves

The federal Open Market Committee consists of the

seven member of the Board of Governors and five presidents of the regional Fed banks

suppose that form a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and one million dollars in required reserves. given this info, we can say that First National Bank faces a required ration of ____ percent

ten

the government agency that oversees the banking systems and is responsible for the conduct of monetary policy in the US is

the Federal Reserve System

Instrument independence is the ability of ____ to set monetary policy ____

the central bank, instruments

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

the currency holding

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

the excess reserve

total reserves minus bank deposits with the Fed equals

vault cash