Ch.4 quiz Econ

56. The size of monetary base is determined by: A) the Federal Reserve. B) the Federal Reserve and banks. C) preferences of households about the form of money they wish to hold. D) business policies of banks and the laws regulating banks.

A) the Federal Reserve.

94. The quantitative easing policy conducted by the Federal Reserve between 2007 and 2011 resulted in a large increase in the monetary base that was partially offset by: A) a significant increase in the reserve-deposit ratio. B) a significant decrease in the reserve-deposit ratio. C) open-market purchases. D) open-market sales.

B) a significant decrease in the reserve-deposit ratio.

97. If many banks fail, this is likely to: A) increase the ratio of currency to deposits. B) decrease the ratio of currency to deposits. C) have no effect on the ratio of currency to deposits. D) decrease the amount of currency in circulation, if the Fed takes no action.

B) decrease the ratio of currency to deposits.

88. If the Federal Reserve increases the interest rate paid on reserves, banks will tend to hold _____ excess reserves, which will _____ the money multiplier. A) more; increase B) more; decrease C) fewer; increase D) fewer; decrease

B) more; decrease

87. To increase the money multiplier, the Fed can: A) conduct open-market purchases. B) conduct open-market sales. C) raise the interest rate paid on reserves. D) lower the interest rate paid on reserves.

D) lower the interest rate paid on reserves.

22. Currency equals: A) M1. B) the sum of funds in checking accounts. C) the sum of checking accounts and paper money. D) the sum of coins and paper money.

D) the sum of coins and paper money.