Chapter 14 Homework

If the required reserve ratio on checkable deposits increases to​ 20%, how much multiple deposit creation will take place when reserves are increased by​ $100? Assume that banks do not hold any excess reserves and the​ public's holdings of currency do not change.

$500

If the required reserve ratio is 10​ percent, currency in circulation is​ $1,200 billion, checkable deposits are​ $1,600 billion, and excess reserves total​ $2,500 billion, then the M1 money multiplier is

0.73

Under​ 100% reserve​ banking, the money multiplier will​ be:

1

The Federal​ Reserve's act of controlling the monetary base through its purchases or sales of securities is known as

an open market operation

By​ definition, when the Fed conducts an open market​ purchase, it​ is:

buying bonds, increasing the quantity of reserves.

The Federal Reserve System is the​ ___________ for the United​ States, which is defined as the government agency responsible for​ __________.

central​ bank; the conduct of monetary policy

The monetary liabilities of the Federal Reserve include

currency in circulation and reserve

If the Fed injects reserves into the banking system and they are held as excess​ reserves, then the money supply

does not change

If the nonbank public holds currency in addition to​ deposits, then an open market purchase will result in

A smaller increase in total deposits than is predicted by the simple deposit multiplier

The operation of the Fed and its monetary policy involve actions that affects its record of holdings known as the​ Fed's

Balance sheet

The process​ whereby, when the Fed supplies the banking system with​ $1 of additional​ reserves, deposits increase by a multiple of that amount is known as

Multiple deposit creation

The monetary policy player that determines the currency holdings is the Holding the monetary base constant, paying interest on reserve should____the excess reserves ratio, which__the money multiploer and_____the money supply

Raise, reduces,reduces

Which of the following players can affect the money supply through open market operations?

the central bank

Which of the following are found on the asset side of the​ Fed's balance​ sheet?

government securities

Two primary assets of the Federal Reserve System​ are:

government securities and loans to commercial banks.

The monetary base is known as

high powered money

When the Fed supplies the banking system with an extra dollar of​ reserves, deposits increase by more than one dollarlong dash—a process called

multiple deposit creation

The monetary policy player that determines the currency holdings is the

nonbank public

What happens to checkable deposits in the banking system when the Fed sells​ $2 million of bonds to the First National​ Bank, assuming that the required reserve ratio on checkable deposits is​ 10%, banks do not hold any excess​ reserves, and the​ public's holdings of currency do not​ change?

Checkable deposits decline by​ $20 million.

What happens to checkable deposits in the banking system when the Fed lends an additional​ $1 million to the First National​ Bank, assuming that the required reserve ratio on checkable deposits is​ 10%, banks do not hold any excess​ reserves, and the​ public's holdings of currency do not​ change?

Checkable deposits rise by​ $10 million.

The monetary policy player that determines the borrowed reserves is the

banking system

Which of the following players can affect the money supply by its holdings of excess reserves>

banks

The monetary base is comprised​ of:

currency in circulation and reserves.

The interest rate charged to banks that borrow funds from the Fed is known as​ the:

discount rate

Total reserves are the sum of​ ________ and​ ________.

excess reserve;required reserves

The monetary policy player that determines the nonborrowed monetary base is the

federal reserve system

If there is a sharp rise in the currency​ ratio, then people begin to hold___deposits relative to currency and the level of multiple deposit expansion_____. This couses the money multiplier to____, which in turn causes the money supply to____

fewer,decrease, fall, decrease

When the Federal Reserve purchases a government bond from a primary​ dealer, reserves in the banking system​ ________ and the monetary base​ ________, everything else held constant.

increase;increase

A bank has a required reserve ratio of​ 10%. If the bank has deposits of​ $100,000 and is holding​ $12,000 in​ reserves:

the bank is holding​ $2,000 in excess reserves.

The ratio of the money supply to the monetary base is​ called:

the money multiplier

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.

Loans that the Fed makes to banks appear on the balance sheet as part of its​ __________, and deposits made by banks appear on the​ Fed's balance sheet as part of its​ ____________.

​assets; liabilities

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

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