Econ 1040 chapter 11

If the reserve ratio is 10 percent, the money multiplier is

10

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

M1 would not change.

Which of the following is not included in either M1 or M2?

U.S. Treasury bills

When the Fed decreases the discount rate, banks will

borrow more from the Fed and lend more to the public. The money supply increases.

The Fed's primary tool to change the money supply is

conducting open market operations.

The interest rate that the Fed charges banks that borrow reserves from it is the

discount rate.

When the Fed conducts open-market purchases,

it buys Treasury securities, which increases the money supply.

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

it increases by $150,000

When the Fed conducts open-market sales,

it sells Treasury securities, which decreases the money supply.

If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new deposit of $500,

its required reserves increase by $40.

A problem that the Fed faces when it attempts to control the money supply is that

since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers.