Question 1

If the required reserve ratio is 15 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the M1 money multiplier is

Accepted Answer

The answer of If the required reserve ratio is 15...

Question 2

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the M1 money multiplier is

Accepted Answer

The answer of If the required reserve ratio is 10...

Question 3

Everything else held constant, an increase in the required reserve ratio on checkable deposits will cause

Accepted Answer

An increase in the required reserve ratio on checkable deposits means that banks will be required to hold a higher percentage of their deposits in reserves and will have less money available to lend out. This will lead to a decrease in the money supply.

Question 4

If the required reserve ratio is one-third, currency in circulation is $300 billion, checkable deposits are $900 billion, and there is no excess reserve, then the M1 money multiplier is

Accepted Answer

The answer of If the required reserve ratio is one-third,...

Question 5

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the currency ratio is

Accepted Answer

The currency ratio is the ratio of currency in circulation to checkable deposits.

Currency in circulation = $400 billion 
Checkable deposits = $1000 billion

Reserves = Required reserve ratio * Checkable deposits 
Reserves = 0.10 * $1000 billion = $100 billion

Excess reserves = Reserves - Required reserves 
$1 billion = Reserves - $100 billion 
Reserves = $101 billion

Total money supply = Currency in circulation + Checkable deposits 
Total money supply = $400 billion + $1000 billion = $1400 billion

So, the currency ratio = Currency in circulation / Checkable deposits = $400 billion / $1000 billion = 0.4.  Therefore, the answer is C.

Question 6

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the currency ratio is

Accepted Answer

The answer of If the required reserve ratio is 10...

Question 7

If the required reserve ratio is one-third, currency in circulation is $300 billion, and checkable deposits are $900 billion, then the currency ratio is

Accepted Answer

Currency ratio is the ratio of currency in circulation to checkable deposits.

Currency Ratio = Currency in Circulation / Checkable Deposits

Currency Ratio = $300 billion / $900 billion

Currency Ratio = 1/3 = 0.33

Therefore, the correct answer is choice B.

Question 8

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the excess reserves-checkable deposit ratio is

Accepted Answer

The required reserves can be calculated as $1000 billion * 0.1 = $100 billion. The total reserves held by banks are the sum of required reserves ($100 billion) and excess reserves ($1 billion), which is $101 billion. Therefore, the excess reserves-checkable deposit ratio is $1 billion divided by $1000 billion, which is 0.001.

Question 9

The formula for the M1 money multiplier is

Accepted Answer

The answer of The formula for the M1 money multiplier...

Question 10

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the monetary base is

Accepted Answer

The monetary base is equal to the sum of currency in circulation and total reserves.

Total reserves = required reserves + excess reserves 
Required reserves = 10% of checkable deposits = 0.10 x $800 billion = $80 billion 
Excess reserves = $0.8 billion

Therefore, total reserves = $80 billion + $0.8 billion = $80.8 billion

Monetary base = currency in circulation + total reserves 
Monetary base = $400 billion + $80.8 billion = $480.8 billion

Thus, the correct answer is B.

Question 11

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the monetary base is

Accepted Answer

The monetary base is calculated by adding the currency in circulation ($400 billion) to the total reserves (required reserves + excess reserves). With a 10% reserve requirement on $1,000 billion in checkable deposits, required reserves are $100 billion. Adding the $1 billion in excess reserves gives total reserves of $101 billion. Thus, the monetary base is $400 billion (currency in circulation) + $101 billion (total reserves) = $501 billion.

Question 12

If the required reserve ratio is 5 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the M1 money multiplier is

Accepted Answer

M1 = Currency + Checkable deposits
Total reserves = Required reserves + Excess reserves

Required reserves = Required reserve ratio * Checkable deposits
= 0.05 * 800 billion
= 40 billion

Total reserves = Required reserves + Excess reserves
= 40 billion + 0.8 billion
= 40.8 billion

M1 money multiplier = 1 / Required reserve ratio
= 1 / 0.05
= 20

M1 = M1 money multiplier * Total reserves
= 20 * 40.8 billion
= 816 billion

M1 money multiplier = M1 / Total reserves
= 816 billion / 40.8 billion
= 2.72

Question 13

If the required reserve ratio is 15 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the M1 money multiplier is

Accepted Answer

The answer of If the required reserve ratio is 15...

Question 14

If the required reserve ratio is one-third, currency in circulation is $300 billion, and checkable deposits are $900 billion, then the money supply is ________ billion.

Accepted Answer

The money supply includes both currency in circulation and checkable deposits. Therefore, it is $300 billion + $900 billion = $1,200 billion.

Question 15

The formula that links checkable deposits to the money supply is

Accepted Answer

The answer of The formula that links checkable deposits to...

Question 16

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the M1 money multiplier is

Accepted Answer

The M1 money multiplier can be calculated as follows:

M1 = currency in circulation + checkable deposits

Required reserves = 10% of checkable deposits

Excess reserves = total reserves - required reserves
                = excess reserves + required reserves - required reserves
                = excess reserves + required reserves
                = $1 billion + 0.1($1000 billion)
                = $101 billion

Total reserves = required reserves + excess reserves
                      = 0.1($1000 billion) + $1 billion 
                      = $101 billion

M1 money multiplier = M1 ÷ total reserves
                                  = ($400 billion + $1000 billion) ÷ $101 billion
                                  = 14.85

Rounding to one decimal place, the M1 money multiplier is 2.8.

Question 17

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the money supply is ________ billion.

Accepted Answer

The answer of If the required reserve ratio is 10...

Question 18

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the excess reserves-checkable deposit ratio is

Accepted Answer

The excess reserves-checkable deposit ratio is calculated by dividing the excess reserves by the checkable deposits. Here, it is $0.8 billion / $800 billion = 0.001.

Question 19

If the required reserve ratio is one-third, currency in circulation is $300 billion, checkable deposits are $900 billion, and there is no excess reserve, then the monetary base is

Accepted Answer

The formula for the monetary base is:
Monetary Base = Currency in Circulation + Reserves
We are given that the required reserve ratio is one-third, which means that banks must hold reserves equal to one-third of their checkable deposits. Therefore, reserves will be equal to (1/3) * $900 billion = $300 billion.
Now, we can use the formula for the monetary base to calculate it as follows:
Monetary Base = $300 billion (reserves) + $300 billion (currency in circulation) = $600 billion. 
Therefore, the monetary base is $600 billion.

Question 20

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the money supply is ________ billion.

Accepted Answer

The money supply can be calculated using the formula: Money Supply = Currency + Checkable Deposits.
First, find the total reserves held by banks: Required Reserves = Required Reserve Ratio x Checkable Deposits = 0.1 x $1,000 billion = $100 billion.
Then, find the actual reserves held by banks: Actual Reserves = Required Reserves + Excess Reserves = $100 billion + $1 billion = $101 billion. 
Finally, find the currency held by the public: Currency = Currency in Circulation - Excess Reserves = $400 billion - $1 billion = $399 billion.
Now we can calculate the money supply: Money Supply = Currency + Checkable Deposits = $399 billion + $1,000 billion = $1,399 billion or $1.4 trillion. Therefore, the correct answer is C.

Quiz 17: The Money Supply Process

If the required reserve ratio is 15 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the M1 money multiplier is

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the M1 money multiplier is

Everything else held constant, an increase in the required reserve ratio on checkable deposits will cause

If the required reserve ratio is one-third, currency in circulation is $300 billion, checkable deposits are $900 billion, and there is no excess reserve, then the M1 money multiplier is

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the currency ratio is

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the currency ratio is

If the required reserve ratio is one-third, currency in circulation is $300 billion, and checkable deposits are $900 billion, then the currency ratio is

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the excess reserves-checkable deposit ratio is

The formula for the M1 money multiplier is

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the monetary base is

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the monetary base is

If the required reserve ratio is 5 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the M1 money multiplier is

If the required reserve ratio is 15 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the M1 money multiplier is

If the required reserve ratio is one-third, currency in circulation is $300 billion, and checkable deposits are $900 billion, then the money supply is ________ billion.

The formula that links checkable deposits to the money supply is

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the M1 money multiplier is

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the money supply is ________ billion.

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the excess reserves-checkable deposit ratio is

If the required reserve ratio is one-third, currency in circulation is $300 billion, checkable deposits are $900 billion, and there is no excess reserve, then the monetary base is

If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable deposits are $1000 billion, and excess reserves total $1 billion, then the money supply is ________ billion.