Econ 640 Study for Test 2

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

1

Suppose that the Fed buys​ $1 million of bonds from the First National Bank. If the First National Bank and all other banks use the resulting increase in reserves to purchase securities only and not to make​ loans, what will happen to checkable​ deposits? Assume the required reserve ratio is 10 percent.

1/0.10 x $1 million = $10 million Checkable deposits increase by​ $10 million.

If the Fed buys​ $1 million of bonds from the First National​ Bank, but an additional​ 10% of any deposit is held as excess​ reserves, what is the total increase in checkable​ deposits? Assume that the required reserve ratio on checkable deposits is​ 10% and the​ public's holdings of currency do not change.

1/0.10 x $1 million = $10 million where 10% is in reserve typically. But this question is asking for an additional 10%, so therefore, 1/0.20 x $1 million = $5 million Increase in checkable deposits is $5 million.

Rank the following assets from most liquid ​(1​) to least liquid ​(6​):

1: Currency 2: Checking account deposits 3: Savings deposits 4: Common Stock 5: Automobile 6: Houses

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.

For each of the following​ assets, indicate​ which, if​ any, of the monetary aggregates includes​ them:

Currency: M1 and M2 Money market mutual funds​ (noninstitutional): M2 only U.S.​ T-bills (with maturities of less than 90​ days): Neither M1 nor M2 Small-denomination time deposits: M2 only Large-cap mutual funds: Neither M1 nor M2 Checkable deposits: M1 and M2

If the Fed sells​ $2 million of bonds to Irving the​ Investor, who pays for the bonds with a briefcase filled with​ currency, what happens to reserves and the monetary​ base? Use​ T-accounts to explain your answer.

Irving the Investor Assets: Liabilities: Currency: -$2 million Securities: +$2 million Federal Reserve System: Assets: Liabilities: Securities: -$2 million Currency: -$2 million Reserves remain unchanged, and the monetary base falls by $2 million

Which of the following is not an important reason for the regional Federal Reserve bank presidents to attend the FOMC​ meetings, even if they are nonvoting​ members?

It provides a greater opportunity for nonvoting members to become voting members in the future.

The presidents of each of the district Federal Reserve banks​ (including the New York Federal Reserve​ bank) are currently not required to undergo a formal political appointment and approval process. Do you think this is​ appropriate?

Maybe. A formal approval process is​ lengthy, which might leave some Federal Reserve districts without​ leadership, possibly creating more problems than it solves.

Which of the following does not explain why it is unlikely that the policy recommendation put forth by the chairman of the Board of Governors would ever be voted down by the rest of the​ FOMC?

The chairman always has the final vote when making monetary policy decisions.

Why is the Twelfth Federal Reserve district so geographically​ large, while the Second Federal Reserve district is so small by​ comparison?

The districts represent the population and economic interests in 1913 when the Federal Reserve Act was created.

If the central bank sells €1 million of bonds and banks reduce their borrowings from the central bank by €1 ​million, predict what will happen to the money supply.

The monetary base would fall by €2 ​million, leading to a decline in the money supply

Predict what will happen to the money supply if there is a sharp rise in the currency ratio.

The money supply falls

Should the Federal Reserve redraw its district​ boundaries, similar to how congressional districts are periodically​ realigned?

Uncertain. This would require Congress to rewrite the Federal Reserve​ Act, which could create opportunities for political interests to interfere with the monetary policy process.

In​ Brazil, a country that underwent a rapid inflation before​ 1994, many transactions were conducted in dollars rather than in​ reals, the domestic currency. During this​ period, the US dollar served what property or properties in​ Brazil?

Unit of account, Medium of exchange, and Store of value

Why did the Bank of England up until 1997 have a low degree of​ independence?

Until​ 1997, the power to set interest rates was determined exclusively by Her​ Majesty's Treasury.

In​ prison, cigarettes are sometimes used among inmates as a form of payment. All of the following explain how cigarettes solve the​ "double coincidence of​ wants" problem, even if a prisoner does not​ smoke, except​:

exchanging cigarettes for other goods and services increases transaction costs.

Advocates of Fed independence fear that subjecting the Fed to direct presidential or congressional control​ would:

impart an inflationary bias to monetary policy and force monetary authorities to sacrifice the​ long-run objective of price stability.

In recent​ years, the tendency for central banks has been​ to:

increase independence

The ability of a central bank to set monetary policy instruments is​ ___________, while the ability of a central bank to set goals of monetary policy is​ _______.

instrument​ independence; goal independence

The theory of bureaucratic behaviour when applied to the Fed helps to explain why the​ Fed:

is so secretive about the conduct of future monetary policy

The European System of Central Banks​ (ESCB) is similar to the Federal Reserve System in​ that:

it is structured such that the central banks for each country have a similar role to that of the Federal Reserve banks.

Critics of Fed independence argue​ that:

it is undemocratic to have monetary policy controlled by an elite group responsible to no one

While legislation enacted in 1998 granted the Bank of Japan new powers and greater​ autonomy, its critics contend​ that:

its independence is limited by the Ministry of​ Finance's veto power over part of the​ Bank's budget

The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to​ maximize:

its own welfare.

In Canada, the Bank of Canada and the government jointly set the goal of monetary​ policy, a target for inflation.​ Thus, when compared to the​ Fed, the Bank of Canada ​has:

less goal independence

The European Central Bank​ (ECB) has complete control over monetary policy in eleven euro countries and has a charter that cannot be changed by legislation. In comparison to the Federal Reserve System the ECB​ is:

more independent.

The president of the United States can exert influence over the Federal Reserve in all of the following ways except​:

reducing the​ Fed's net earnings.

The theory of bureaucratic behavior suggests that the Federal Reserve will:

A. devise clever strategies in an effort to avoid blame for poor economic performance. B. try to gain regulatory power over more banks. C. try to avoid a conflict with the president and Congress over increases in interest rates. All are correct

Increasing the independence of a central bank would​ probably:

A. reduce pressures to pursue inflationary policies B. hinder the coordination of monetary and fiscal policy C. allow the central bank to more easily pursue monetary policies that directly oppose the​ government's fiscal policies All are correct

​'The independence of the Fed leaves it completely unaccountable for its​ actions.' Why is this statement not​ true?

A.The Fed has to report to Congress on a semiannual basis to explain its actions B.The legislation that structures the Fed is written by Congress and is subject to change C.The president can appoint a new chairman of the Board of Governors every four years All are correct

The table to the right shows hypothetical​ values, in billions of dollars. Use the table to calculate the M1 and M2 money supply for each year. ​(Enter your responses rounded to the nearest​ dollar.) The M1 money supply is the sum of rows​ A, E, and G for each year. The M2 money supply is the sum of the components A​ - G for each year.

A: Currency B. Money market mutual fund shares C: Saving account deposits D: Money market deposit accounts E: Demand and checkable deposits F: Small-denomination time deposits G: Traveler's checks H: 3-month Treasury bills

Which of the Federal​ Reserves measures of the monetary aggregates—M1 or M2—is composed of the most liquid​ assets? Which is the larger​ measure?

All else​ equal, M1 is the monetary aggregate composed of the most liquid assets and M2 is the larger measure.

Why is the New York Federal Reserve always a voting member on the​ FOMC?

All of the above are correct.

Show the​ T-account for the banking system in equilibrium.

Banking System Assets Liabilities Reserves +$1 billion Discount loans +$1 billion Loans +$10 billion Checkable deposits +$10 billion

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

Banks

The Fed provides an emergency load to a bank for $1,000,000

Banks: Assets and liabilities increase. Fed: Assets and liabilities increase

It is not unusual to find a business that displays a sign saying​ "no personal​ checks, please."

Based on this​ observation, a checking account must be less liquid than currency.

Most of the time it is quite difficult to separate the three functions of money. Money performs its three functions at all​ times, but sometimes we can stress one in particular. For each of the following​ situations, identify which function of money is emphasized.

Brooke accepts money in exchange for performing her daily tasks at her​ office, since she knows she can use that money to buy goods and services. In this​ case, money is being used as a medium of exchange. Tim wants to calculate the relative value of oranges and​ apples, and therefore checks the price per pound of each of these goods quoted in currency units. In this​ case, money is being used as a unit of account. Maria is currently pregnant. She expects her expenditures to increase in the future and decides to increase the balance in her savings account. In this​ case, money is being used as a store of value.

In what ways can the regional Federal Reserve Banks influence the conduct of monetary​ policy?

By having members serve on the Federal Advisory Council. By having five of their presidents sit on the FOMC. Through their administration of the discount facilities at each bank. All above are correct

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.

If a bank sells​ $10 million of bonds to the Fed to pay back​ $10 million on the loan it​ owes, what will be the effect on the level of checkable​ deposits? Assume 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 do not change.

Assume 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. If the Fed reduces reserves by selling​ $5 million worth of bonds to the​ banks, what will the​ T-account of the banking system look like when the banking system is in​ equilibrium? What will have happened to the level of checkable​ deposits?

Checkable deposits fall by​ $50 million and the​ T-account is: Banking System Assets Liabilities Reserves -$5 million Checkable deposits -$50 million Securities +$5 million Loans -$50 million

If you decide to hold​ $100 less cash than usual and therefore deposit​ $100 more cash in the​ bank, what effect will this have on checkable deposits in the banking system if the rest of the public keeps its holdings of currency​ constant? Assume the required reserve ratio is​ 10% and banks do not hold any excess reserves.

Checkable deposits increase by​ $1,000.

Properly categorize each of the following​ concepts:

Debt Stock variable Money Stock variable Income Flow variable Savings deposits Stock variable Wealth Stock variable

Relate each concept to its corresponding​ definition:

Debt: What you owe—the accumulation of spending over and above periodic earnings Money: A tool used to facilitate​ transactions, store​ wealth, or to be used as a yardstick to compare values. Income: Earnings received from​ working, property​ rentals, entrepreneurship, or the ownership of financial assets. Savings: The difference between what is earned and what is spent. This adds to total wealth. Wealth: What you own: The total collection of assets that serve to store value. This includes not only money but also other assets such as​ bonds, common​ stock, art,​ land, furniture,​ cars, and houses.

How do checkable deposits differ from demand deposits?

Demand deposits are those transactions accounts against which an unlimited number of checks can ordinarily be written. Checkable deposits often carry restrictions on transferability.

Classify the following transaction as affecting either​ assets, a​ liabilities, or neither for each of the​ "players" in the money supply process—the Federal​ Reserve, banks, and depositors. You use your debit card to purchase a meal at a restaurant for $100.

Depositors: Assets rise and are offset by a fall in assets due to lower checking account balances. Banks: Reserve assets decrease and checkable deposit liabilities decrease.

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

The central bank

Assume that you are interested in earning some return on idle balances you usually keep in your checking account and decide to buy some money market mutual fund shares by writing a check.

Everything else the​ same, M1 will decrease and M2 will stay the same When the funds were in your checking​ account, they were counted as M1. When you buy money market mutual​ funds, they are counted in M2​ (but not in​ M1), so M1 decreases.​ Consequently, M2 does not increase because the funds were already counted in M2​ (as part of M1—a component of​ M2).

The diagram to the right shows the rate of inflation in the United States over the past 35 years. As it is well​ known, the United States experienced​ double-digit inflation in the late 1970s. What property would lead individuals to hold more money in the 1990s than in the​ 1970s?

Everything else​ equal, this would demonstrate the property of money as a store of value.

​"The Fed can perfectly control the amount of reserves in the​ system." Is this statement​ true, false, or​ uncertain? Explain your answer.

False. A shift from deposits to currency will affect the amount of​ reserves, and since other players are involved in this​ process, the Fed ultimately cannot control the level of reserves in the system.

​"The Fed can perfectly control the amount of the monetary​ base, but has less control over the composition of the monetary​ base." Is this statement​ true, false, or​ uncertain? Explain your answer.

False. Since the Fed cannot control the amount of discount lending to financial​ institutions, it does not have perfect control over the amount of reserves in the banking system and hence the monetary base.

People in the United States in the nineteenth century were sometimes willing to be paid by cheque rather than with​ gold, even though they knew that there was a possibility that the cheque might bounce. Which of the following would represent an advantage of gold over cheques as a form of​ money?

Gold has intrinsic value when compared to cheques

In ancient​ Greece, what property made gold a more likely candidate for use as money than​ wine?

Gold's property as a store of value made it a more likely candidate for use as money when compared to wine.

In October​ 2008, the Federal Reserve began paying interest on the amount of excess reserves held by banks.​ How, if at​ all, might this affect the multiplier process and the money​ supply?

Holding the monetary base​ constant, paying interest on reserves should raise the excess reserves​ ratio, which reduces the money multiplier and reduces the money supply.

What effect might a financial panic have on the money multiplier and the money​ supply? Why?

In a financial​ panic, you would expect the money multiplier to decrease and the money supply to decrease, which would cause the excess reserves ratio to increase. Thus depositors are likely to increase their holdings of currency.

Which of the following statements about central bank structure and independence is​ true?

In recent​ years, there has been a remarkable trend toward increasing independence.

If you use an online payment system such as PayPal to purchase goods or services on the​ Internet, this will affect

Neither M1 nor M2 Neither M1 nor M2 is​ affected: Although PayPal and many other​ e-money systems work as other forms of money do to facilitate purchases of goods and​ services, this form of payment does not count in M1 or M2. Because PayPal and similar payment systems are generally​ credit-based, this requires payment at a future date for funds used​ today; those future payments must be made using existing money that is already in the​ system, such as currency or funds in a bank deposit account. In other​ words, the M1 and M2 money supplies would theoretically remain the​ same, but money would move from your checking account to a third​ party, once the credit transaction is settled.

Do the​ fourteen-year nonrenewable terms for governors effectively insulate the Board of Governors from political​ pressure?

No. In order to gain additional power to regulate the financial​ system, the governors need the support of Congress and the president to pass favorable legislation.

Which of the following is a disadvantage of using fiat money?

Public authorities may be tempted to produce too much of it

If the Fed sells​ $2 million of bonds to the First National​ Bank, what happens to reserves and the monetary​ base? Complete the​ T-accounts below to explain your answer.

Reserves and the monetary base fall by​ $2 million, as the following​ T-accounts indicate: First National Bank: Assets: Liabilities: Reserves: -$2 million Securities: +$2 million Federal Reserve System: Assets: Liabilities: Securities -$2 million Reserves: -$2million Reserves fall by $2 million, and the monetary base falls by $2 million. Monetary base = assets

If a bank depositor withdraws​ $1,000 of currency from an​ account, what happens to​ reserves, checkable​ deposits, and the monetary​ base? Assume that the required reserve ratio on checkable deposits is​ 10% and banks do not hold any excess reserves.

Reserves fall by​ $1,000, checkable deposits fall by​ $10,000, and the monetary base remains unchanged.

If the Fed lends five banks an additional total of​ $100 million but depositors withdraw​ $50 million and hold it as​ currency, what happens to reserves and the monetary​ base? Use​ T-accounts to explain your answer.

Reserves increase by​ $50 million but the monetary base increases by​ $100 million, as the​ T-accounts for the five banks and the Fed​ indicate: Five Banks Assets Liabilities Reserves +$50 million Discount Loans +$100 million Deposits -$50 million Federal Reserve System Assets Liabilities Discount Loans: +$100 million Reserves: +$50 million Currency: +$50 million Reserves increase by $50 million, and the monetary base increases by $100 million

Which of the following functions is not performed by any of the 12 regional Federal Reserve​ banks?

Setting interest rates payable on time deposits

Which of the following functions is not performed by the twelve Federal Reserve​ Banks?

Setting the reserve requirement.

Despite the important role that the Board of Governors has in setting monetary​ policy, seats to serve on the Board of Governors can sometimes be empty for several years. How could this​ happen?

Since members of the Board of Governors are appointed by the president and confirmed by the​ Senate, these seats may remain vacant due to the arduous and lengthy political approval process that candidates must endure.

Which of the following entities in the Federal Reserve System controls the discount rate?

The Board of Governors

Which of the following entities in the Federal Reserve System sets reserve​ requirements?

The Board of Governors

Which is more​ independent, the Federal Reserve or the European Central​ Bank? Why?

The European Central Bank—Its charter cannot be changed through​ legislation, making it more independent than the Federal Reserve.

Which of the following entities in the Federal Reserve System directs open market operations?

The FOMC

If the Federal Reserve has a specific mandate from Congress to achieve​ "maximum employment and​ low, stable​ prices," then how does the Fed have goal​ independence?

The Fed is free to interpret exactly what these objectives mean.

How does the Federal Reserve have a high degree of instrument​ independence?

The Federal Reserve can choose any method it wants in order to achieve a given set of policy objectives.

Assume that the required reserve ratio on checkable deposits is​ 10% and the​ public's holdings of currency do not change. If reserves in the banking system increase by​ $1 billion as a result of discount loans of​ $1 billion, and checkable deposits increase by​ $9 billion, why​ isn't the banking system in​ equilibrium?

The banking system is not in equilibrium because there continues to be​ $100 million of excess reserves​ (equals $1 billion of reserves minus​ $900 million of required​ reserves, 10 percent of the​ $9 billion of​ deposits).

Suppose that the required reserve ratio is 9​%, currency in circulation is ​$610 ​billion, the amount of checkable deposits is ​$890 ​billion, and excess reserves are ​$16 billion. The money supply is: The currency deposit ratio is: The excess reserves ratio is The money multiplier is: Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of ​$1,450 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in the previous steps are the​ same, the money supply should Suppose the central bank conducts the same open market purchase as in the previous​ step, except that banks choose to hold all of these proceeds as excess reserves rather than loan them​ out, due to fear of a financial crisis. Assuming that currency and deposits remain the​ same, the new amount of excess reserves is The new excess reserves ratio is The money supply is The money multiplier is: Following the financial crisis in​ 2008, the Federal Reserve began injecting the banking system with massive amounts of​ liquidity, and at the same​ time, very little lending occurred. As a​ result, the M1 money multiplier was below 1 for most of the time from October 2008 through 2011. How does this relate to your answer to the previous​ step?

The money supply is the sum of currency in circulation and the amount of checkable deposits. 610 billion + 890 billion = $1500 billion The currency deposit ratio can be found by dividing the amount of currency by the amount of checkable deposits. 610/890 = 0.685 To calculate the excess reserves​ ratio, divide the amount of excess reserves by the amount of checkable deposits. 16/890 = 0.018 1+0.685/0.09+0.018+0.685 = 2.12 Increase MB = 610+80.1+16+1450 = 2156.1 billion 2.12*2156.1 = 4.571 billion 16+1450 = $1466 billion 1466/890 = 1.65 The money supply is still ​$1,500 ​billion, since both currency and deposits have not changed. 1+0.685/0.09+1.65+0.685 = 0.69 If large amounts of reserves enter the banking system but are held as excess​ reserves, it is possible for the money multiplier to fall below one.

If the economy starts to boom and loan demand picks​ up, what do you predict will happen to the money​ supply?

The money supply will increase.

The Fed buys​ $100 million of bonds from the public and also lowers the reserve requirement r. What will happen to the money​ supply?

The money supply will increase.

What do you predict would happen to the money supply if expected inflation suddenly​ increased?

The money supply will increase.

Which of the following is not part of the checks and balances of the Federal Reserve System?

The requirement that all depository institutions keep deposits at the Fed.

During the Great Depression years from​ 1930-1933, both the currency ratio c and the excess reserves ratio e rose dramatically. Based on the information in the graphs​ above, which of the following statements is​ true?

The rise in c results in a decline in the overall level of multiple deposit expansion and the rise in e reduces the amount of reserves available to support​ deposits, both leading to a smaller money multiplier.

What is the primary tool that Congress uses to exercise some control over the​ Fed?

The threat that Congress will acquire greater control over the​ Fed's finances and budget.

The players in the money supply process include all of the following except​:

The treasury

Why was the Federal Reserve System set up with twelve regional Federal Reserve banks rather than one central​ bank, as in other​ countries?

The writers of the Federal Reserve Act wanted to ensure the​ Fed's power was not centralized in a single location.

What is the main disadvantage of moving to e-money or moving to a cashless​ society?

There are problems with security and privacy

The money multiplier declined significantly during the period​ 1930-1933 and also during the recent financial crisis of​ 2008-2010. Yet the M1 money supply decreased by​ 25% in the Depression period but increased by more than​ 20% during the recent financial crisis. What explains the difference in​ outcomes?

There was a significant increase in the monetary base during the recent financial crisis.

Which of the following statements regarding Federal Reserve independence is​ incorrect?

The​ 14-year non-renewable terms for governors effectively insulate the Board of Governors from political pressure

​'The independence of the Fed has meant that it takes the long view and not the short​ view.' Assume this statement is correct and answer the following questions.

The​ Fed's personnel are not directly affected by the outcome of the next ​election; therefore, it has some level of ​ independence: True The Fed can still be influenced by political​ pressure: False The​ Fed's lack of accountability may make the Fed more​ irresponsible: False The members of the board generally cannot be reappointed to their​ position; they do not need to do favours in order to keep their job in the future. True

The Fed is the most independent of all US government agencies. What is the main difference between it and other government agencies that explains the​ Fed's greater​ independence?

The​ Fed's source of revenue is free from the appropriations process

The Fed promotes secrecy by not releasing the minutes of the FOMC meetings to Congress or the public immediately. Based on this​ statement, indicate whether the following are arguments for​ (pros) or arguments against​ (cons) this policy.

This policy allows the Fed more independence in making monetary policy​ decisions: Pro This policy encourages the Fed to be less accountable for its​ actions: Con This policy reduces transparency because people cannot figure out what the goal of the Fed​ is: Con This policy should reduce inflationary pressures and political business​ cycles: Pro

"The Federal Reserve System resembles the U.S. Constitution in that it was designed with many checks and ​balances." Is this statement​ true, false, or​ uncertain? Explain your answer.

True. Because of public hostility and the centralization of​ power, the Federal Reserve System was created with many checks and balances to diffuse power.

Should the Federal Reserve be subject to periodic auditing of its​ policies, procedures, and​ finances? Why or why​ not?

Uncertain. Auditing could make the Federal Reserve more accountable but less independent.

In September​ 2008, the growth rate of the M1 money supply was​ zero, while the growth rate of the M2 money supply was about​ 5%. In July​ 2009, the growth rate of M1 was about​ 17%, and the growth rate of M2 was about​ 8%. When interpreting changes in the growth rates of M1 and​ M2, Federal Reserve policymakers should​ recognize: ​(Check all that​ apply.)

the growth rate of M2 should be higher than the​ 3% increase shown over this period. an inflationary problem may exist in the future as the growth of M1 to​ 17% is alarmingly high. During the period in​ question, the M1 growth rate increased by​ 17%, while the M2 growth rate increased by only​ 3%. Although both measures are moving in the same direction​, the magnitude of the difference in growth rates between the two makes it difficult to judge the appropriateness of monetary policy by just looking at the money supply measures alone. For​ instance, if focused only on the M2 money​ supply, knowing the economy was in severe economic​ contraction, it would suggest that the growth rate of M2 should be even higher than the​ 3% increase over this period. On the other​ hand, if focused only on the M1 growth increase of​ 17%, this may seem alarmingly high and suggest an inflationary problem in the future.

A dilemma challenging the existing structure of the European Central Bank​ (ECB) has been brought on​ by:

the possibility of expanding the membership in the Eurosystem

When the charter of the Second Bank of the United States expired in​ 1836:

there was no lender of last resort to provide reserves to the banking system.

The public interest view of central bank behavior suggests that the objective of a bureaucracy is to​ maximize:

the​ public's welfare.

The primary reason for the creation of the Federal Reserve System ​was:

to reduce or eliminate future bank panics.

The First National Bank receives an extra​ $100 of reserves but decides not to lend any of these reserves. How much deposit creation takes place for the entire banking​ system?

​$0

​'The money multiplier is necessarily greater than​ 1.' Is this statement true or​ false?

​True, because, in​ reality, the required and excess reserves ratios typically add up to less than one

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

Eliminating the​ Fed's independence might lead to a more pronounced political business cycle because a politically exposed Fed would be more concerned with​:

​short-run objectives and thus be more likely to engage in expansionary policies designed to lower unemployment and interest rates before an election.