ECON CH 14
A simple deposit multiplier equal to one implies a required reserve equal to______%
100
A simple deposit multiplier equal to two implies a required reserve equal to ___%
50
Total reserves minus vault cash equals _____ ______ with Fed
bank deposits
The three players in the money supply process include _____,_____, and the ____ _____
banks, depositors, central bank
The Fed does not tightly control the monetary base because it does not completely control ______ _____
borrowed reserves
What is the relationship between borrowed reserves(br) non borrowed monetary base(MBn), and monetary base(mb)?
br=mb-mbn
High powers money - reserves=
currency in circulation
monetary base - reserves=
currency in circulation
If the proceeds are kept in _____, the open market purchase 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 holdings of _____, or of banks to hold excess _______ will result in a smaller expansion of deposits than the simple model predicts.
currency, excess reserves
The monetary base consists of ______ in circulation and ________
currency, reserves
______ in circulation and _______ are monetary liabilities of the Fed
currency, reserves
A single bank can increase its loans up to a maximum amount equal to its _______ reserves
excess
Vault cash plus deposits with federal reserve banks minus required reserves equal______ reserves
excess
Everything else held constant, an increase in currency holdings will cause the money supply to _____
fall
When a member of the nonbank public withdraws currency from her bank account, bank reserves ______ , and monetary base remains unchanged
fall
- government agency that oversees the banking system and is responsible for the conduct of the monetary policy in the US
federal reserve system
Most observers agree that the most important player of the money supply process is the ______ ______ _____
federal reserve system
If the Fed decided to reduce bank reserves, it can sell ______ _______
government bonds
An increase in float leads to an equal _____ in the monetary base in the short run.
increase
When the Fed purchases a bond from a bank, its reserves and monetary base ______
increase
- the sum of the Fed's monetary liabilities and the US treasury's monetary liabilities
monetary base
When the Fed supplies the banking system with an extra dollar of reserves, deposits increase by more than one dollar. This process is called ______
multiple deposit creation
The amount of borrowed reserves is ____ related to the discount rate, and is ____ related to the market interest rate,
negatively, positively
A decrease in float leads to an equal _______ decrease in the monetary base in the short run
decrease
When the Fed sells a government bond to a bank, reserves and monetary base ________
decrease
The simple deposit multiplier can be expressed as the ratio of the change in ______ divided by the change in _____ in banking system
deposits, reserves
When banks borrow money from the federal reserve, these funds are called _____ loans
discount
- the interest rate the Fed charges banks borrowing from the Fed
discount rate
Subtracting borrowed reserves from the monetary base obtains the ________ monetary base
nonborrowed
- purchases and sales of government securities by the federal reserve
open market operations
Money supply is _____ related to the non borrowed monetary base, and ______ related to the level of borrowed reserves.
positively, positively
2 ways the Fed can provide additional reserves to the banking system: It can _______ government bonds or it can ______ discount loans to commercial banks
purchase, extend
If a person selling bonds to the Fed cashes the Feds check, then reserves ________ and currency in circulation _______
remain unchanged, increases
- the amount of deposits that banks must hold in reserve is ____ ______
required reserves
Reserves are equal to the sum of _______ reserves and _______ reserves
required, excess
Monetary base - currency in circulation =
reserves
An increase in the non borrowed monetary base, will cause the money supply to _____
rise
The monetary base declines when the Feds sell ______
securities
________ and loans to financial institutions are federal reserve assets
securities
Total reserves minus bank deposits with Fed equals _________
vault cash