Chapter 14 Quiz

Since the Federal Reserve sets the required reserve ratio to less than one, one dollar of reserves can support ________ of checkable deposits. A. exactly one dollar B. exactly twice the amount C. more than one dollar D. less than one dollar

C

When the Fed buys $100 worth of bonds from a primary dealer, reserves in the banking system A. decrease by more than $100. B. increase by more than $100. C. decrease by $100. D. increase by $100.

D

Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and nine million dollars in excess reserves. Given this information, we can say First National Bank has ________ million dollars in required reserves. A. one B. two C. eight D. ten

A

The government agency that oversees the banking system and is responsible for the conduct of monetary policy in the United States is A. the Federal Reserve System. B. the U.S. Gold Commission. C. the United States Treasury. D. the House of Representatives.

A

Total reserves are the sum of ________ and ________. A. excess reserves; required reserves B. required reserves; currency in circulation C. excess reserves; borrowed reserves D. vault cash; excess reserves

A

An increase in the monetary base that goes into ________ is not multiplied, while an increase that goes into ________ is multiplied. A. excess reserves; currency B. currency; deposits C. currency; excess reserves D. deposits; currency

B

In the simple deposit expansion model, if the Fed extends a $100 discount loan to a bank that previously had no excess reserves, deposits in the banking system can potentially increase by A. $10. B. $100. C. $100 times the reciprocal of the required reserve ratio. D. $100 times the required reserve ratio.

C

The monetary base consists of A. currency in circulation and the U.S. Treasury's monetary liabilities. B. reserves and Federal Reserve Notes. C. currency in circulation and reserves. D. currency in circulation and Federal Reserve notes.

C

When the Federal Reserve sells a government bond to a primary dealer, reserves in the banking system ________ and the monetary base ________, everything else held constant. A. increase; decreases B. decrease; increases C. decrease; decreases D. increase; increases

C