A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of
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Sample Test Show Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Barter is
____ 2. Transaction costs are best defined as the
____ 3. If peanuts were widely accepted for purposes of exchange, then
____ 4. Money evolved out of the self-interested actions of
____ 5. The requirement of a "double coincidence of wants" is the chief ____ of the ____ exchange system.
____ 6. M1 is comprised of currency held outside banks + traveler�s checks + ____.
____ 7. Fractional reserve banking is a term used to describe a banking system whereby
____ 8. Required reserves are the amount of
____ 9. If checkable deposits in Bank A total $430 million and the required reserve ratio is 10 percent, then required reserves at Bank A equal
____ 10. Tenth National Bank holds $196,000,000 in checkable deposits and $22,500,000 in reserves. With a required reserve ratio of 10 percent, how much in excess reserves is Tenth National holding?
____ 11. The amount of required reserves a bank holds depends on the
____ 12. The banking system increases the money supply by creating
____ 13. A required reserve ratio of 9 percent gives rise to a simple deposit multiplier of
____ 14. Bank A has deposits of $10,000 and reserves of $1,200. If the required reserve ratio is 10 percent, the bank has excess reserves of
____ 15. Suppose that the excess reserves in Bank A increase by $800. If the required reserve ratio is 25 percent, what is the maximum change in checkable deposits brought about by the banking system?
____ 16. Bank A holds $1 million in required reserves and the required reserve ratio is 10 percent. It follows that Bank A holds checkable deposit liabilities that total
____ 17. A bank has zero excess reserves, with a required reserve ratio of 10 percent. If $100,000 in cash is withdrawn from the bank, it has a reserve deficiency of
____ 18. National Bank holds $109,000,000 in checkable deposits and $1,125,000 in excess reserves under a required reserve ratio of 12 percent. Suppose customers of the bank bring in $5,000,000 in currency to add to their checkable deposits. How much money can this bank now create at maximum?
____ 19. Suppose 20,000 new one-dollar bills fall from the sky into the hands of Quincy Harrison. If we assume the required reserve ratio is 10 percent, what is the minimum increase in the money supply that may result?
____ 20. The simple deposit multiplier is
____ 21. If the composition of the money supply changes such that there is less currency in the hands of the public and more checkable deposits, the money supply likely
____ 22. The U.S. money supply is currently backed by
____ 23. Bank A has checkable deposits of $10,000 and reserves of $3,000. The required reserve ratio is 12.5 percent. The bank can loan out a maximum of
____ 24. The banking system has deposits of $100 billion and no excess reserves. The required reserve ratio is 12.5 percent. A deposit of $10 billion in new money is made in Bank A, and no other bank in the banking system loses reserves. The maximum increase in checkable deposits that can be brought about by Bank A is
____ 25. The Federal Reserve System began operations in
____ 26. The United States is divided into ____ Federal Reserve districts, each with a district bank.
____ 27. If the Fed purchases government securities from commercial banks, the reserves of the banking system will immediately
____ 28. If the Fed purchases government securities from a commercial bank, which of the following will happen?
____ 29. If the Fed wants to increase the money supply through an open market operation, it will
____ 30. Suppose the Fed forecasts a reduction in cash leakages. It might offset the effect of this on the money supply by
____ 31. An "open market operation" is said to occur when the Fed
____ 32. The interest rate that a commercial bank pays when it borrows from the Fed is the ____ rate.
____ 33. Which of the following will decrease the money supply?
____ 34. The Board of Governors
____ 35. When the Fed purchases securities from a bank, it ____ reserves and ____ the money supply.
____ 36. When the Fed purchases securities from a member of the public with a check that is cashed,
____ 37. Open market purchases of securities
____ 38. In the equation of exchange, the letter "V" stands for
____ 39. In the equation of exchange, the money supply multiplied by velocity equals
____ 40. In the equation of exchange, "PQ" stands for
____ 41. In the equation of exchange, the average number of times a dollar is used to purchase a final good or service is the ____ of money.
____ 42. Velocity equals GDP ____ the money supply.
____ 43. If M = $400, P = $10, and Q = 100, then V is
____ 44. If GDP is $9,000 and velocity is 3, the money supply is
____ 45. The simple quantity theory of money can be written as
____ 46. One-shot inflation can originate
____ 47. MV in the equation of exchange is also defined as
____ 48. According to monetarists, changes in velocity can
Exhibit 13-2 ____ 49. Refer to Exhibit 13-2. Starting from point A, a one-shot, demand-side-induced inflation raises the price level in the economy to P2. Assuming no other changes, the economy is likely to settle at point
____ 50. Refer to Exhibit 13-2. A continued increase in the price of oil, combined with Fed attempts to respond to these oil shocks by increasing aggregate demand, is likely to take the economy along which of the following paths?
Sample Test Answer Section MULTIPLE CHOICE 1. ANS: C PTS: 1 DIF: Easy NAT: Analytic LOC: The role of money 2. ANS: D PTS: 1 DIF: Easy NAT: Analytic LOC: The role of money 3. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 4. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 5. ANS: C PTS: 1 DIF: Easy NAT: Analytic LOC: The role of money 6. ANS: D PTS: 1 DIF: Easy NAT: Analytic LOC: The role of money NOT: NEW 7. ANS: C PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 8. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 9. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money NOT: NEW 10. ANS: B PTS: 1 DIF: Difficult NAT: Analytic LOC: The role of money NOT: NEW 11. ANS: A PTS: 1 DIF: Easy NAT: Analytic LOC: The role of money 12. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 13. ANS: C PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money NOT: NEW 14. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money NOT: NEW 15. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money NOT: NEW 16. ANS: B PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 17. ANS: B PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 18. ANS: C PTS: 1 DIF: Difficult NAT: Analytic LOC: The role of money 19. ANS: C PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 20. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 21. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 22. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 23. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: The role of money 24. ANS: A PTS: 1 DIF: Difficult NAT: Analytic LOC: The role of money 25. ANS: C PTS: 1 DIF: Easy NAT: Analytic LOC: The role of government 26. ANS: C PTS: 1 DIF: Easy NAT: Analytic LOC: The role of government 27. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 28. ANS: E PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 29. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 30. ANS: B PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 31. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 32. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 33. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 34. ANS: A PTS: 1 DIF: Easy NAT: Analytic LOC: The role of government 35. ANS: B PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 36. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 37. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: Monetary and fiscal policy 38. ANS: D PTS: 1 DIF: Easy NAT: Analytic LOC: Understanding and Applying Economic Models 39. ANS: A PTS: 1 DIF: Easy NAT: Analytic LOC: Understanding and Applying Economic Models 40. ANS: A PTS: 1 DIF: Easy NAT: Analytic LOC: Understanding and Applying Economic Models 41. ANS: C PTS: 1 DIF: Easy NAT: Analytic LOC: Understanding and Applying Economic Models 42. ANS: C PTS: 1 DIF: Moderate NAT: Analytic LOC: Understanding and Applying Economic Models 43. ANS: A PTS: 1 DIF: Easy NAT: Analytic LOC: Understanding and Applying Economic Models NOT: NEW 44. ANS: D PTS: 1 DIF: Easy NAT: Analytic LOC: Understanding and Applying Economic Models NOT: NEW 45. ANS: A PTS: 1 DIF: Moderate NAT: Analytic LOC: Understanding and Applying Economic Models 46. ANS: C PTS: 1 DIF: Moderate NAT: Analytic LOC: Understanding and Applying Economic Models 47. ANS: B PTS: 1 DIF: Moderate NAT: Analytic LOC: Understanding and Applying Economic Models 48. ANS: D PTS: 1 DIF: Moderate NAT: Analytic LOC: Understanding and Applying Economic Models 49. ANS: B PTS: 1 DIF: Moderate NAT: Analytic LOC: Understanding and Applying Economic Models 50. ANS: D PTS: 1 DIF: Difficult NAT: Analytic LOC: Understanding and Applying Economic Models What is the money multiplier when the reserve ratio is 12.5 percent?Answer and Explanation: The required reserve ratio to give a money multiplier of 12.5 is 0.8 or 8%.
What is the simple deposit multiplier if reserve requirement is 20 %?The deposit multiplier formula is: 1 / reserve ratio. So with a required reserve ratio of 20%, the deposit multiplier is five. So for every dollar in the bank's reserves, the financial institution can boost the money supply by up to $5.
What is the simple deposit multiplier formula?The simple deposit multiplier is ∆D = (1/rr) × ∆R, where ∆D = change in deposits; ∆R = change in reserves; rr = required reserve ratio. The simple deposit multiplier assumes that banks hold no excess reserves and that the public holds no currency.
What is the money multiplier if the reserve requirement is 10 %?If the reserve requirement is 10%, then the money supply reserve multiplier is 10 and the money supply should be 10 times reserves. When a reserve requirement is 10%, this also means that a bank can lend 90% of its deposits.
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