Question 1

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

M1 = Currency + Checkable Deposits
Reserves = Required Reserve Ratio x Checkable Deposits
Excess Reserves = Reserves - Required Reserves

Reserves = 0.1 x $1000 billion = $100 billion
Excess Reserves = $1 billion

Therefore, Total Reserves = Required Reserves + Excess Reserves = $101 billion

Money Multiplier = 1/Required Reserve Ratio = 1/0.1 = 10

M1 = Money Multiplier x Total Reserves = 10 x $101 billion = $1010 billion

M1 = Currency + Checkable Deposits
$1010 billion = $400 billion + Checkable Deposits
Checkable Deposits = $610 billion

M1 Money Multiplier = M1/Currency in Circulation
M1 Money Multiplier = ($610 billion + $400 billion)/$400 billion
M1 Money Multiplier = 2.8

Therefore, the M1 Money Multiplier is 2.8. The correct choice is B.

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 money supply is ________ billion.

Accepted Answer

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

Question 3

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-deposit ratio is

Accepted Answer

The currency-deposit ratio is calculated by dividing the currency in circulation by the checkable deposits. In this case, it is $400 billion / $800 billion = 0.5.

Question 4

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 5

If the required reserve ratio is 10 percent,currency in circulation is $1,200 billion,checkable deposits are $1,600 billion,and excess reserves total $2,500 billion,then the M1 money multiplier is

Accepted Answer

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

Question 6

If the Fed injects reserves into the banking system and they are held as excess reserves,then the money supply

Accepted Answer

If the injected reserves are held as excess reserves by the banking system, they do not enter into circulation and therefore do not affect the money supply. Hence, there will be no change in the money supply.

Question 7

The total amount of required reserves in the banking system is equal to the ________ the required reserve ratio and checkable deposits.

Accepted Answer

The total amount of required reserves can be calculated by multiplying the required reserve ratio by the amount of checkable deposits in the banking system. This gives us the product of the two variables, hence the answer is (C) product of.

Question 8

If the required reserve ratio is 10 percent,currency in circulation is $1,200 billion,checkable deposits are $1,600 billion,and excess reserves total $2,500 billion,then the excess reserves-checkable deposit ratio is

Accepted Answer

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

Question 9

The total amount of reserves in the banking system is equal to the ________ required reserves and excess reserves.

Accepted Answer

The total amount of reserves in the banking system is the sum of required reserves and excess reserves. Required reserves are the minimum amount of reserves that banks are required to hold by the Federal Reserve. Excess reserves are any reserves held above the required amount. The sum of required reserves and excess reserves gives the total amount of reserves held by banks in the system.

Question 10

An assumption in the model of the money supply process is that the desired levels of currency and excess reserves

Accepted Answer

The model assumes that the desired levels of currency and excess reserves grow proportionally with checkable deposits. This is based on the assumption that banks hold a desired reserve ratio against checkable deposits, and as deposits increase, so do the desired levels of currency and excess reserves.

Question 11

An increase in the monetary base that goes into currency is ________,while an increase that goes into deposits is ________.

Accepted Answer

An increase in the monetary base that goes into currency is not multiplied because currency held by the public does not create additional deposits. An increase in the monetary base that goes into deposits is multiplied because banks are able to create additional deposits through the process of fractional reserve banking.

Question 12

If the Fed injects reserves into the banking system and they are held as excess reserves,then the monetary base ________ and the money supply ________.

Accepted Answer

When the Fed injects reserves into the banking system and they are held as excess reserves, the monetary base (total amount of currency in circulation plus bank reserves) increases but the money supply (total amount of money in circulation in the economy) remains unchanged because the excess reserves are not being lent out to create new loans and deposits.

Question 13

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.

Question 14

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-deposit ratio is

Accepted Answer

The formula for the currency-deposit ratio is as follows:

Currency-deposit ratio = Currency in circulation / Checkable deposits

Substituting the given values:

Currency-deposit ratio = $400 billion / $1,000 billion = 0.40

Hence, the correct answer is C) 0.40.

Question 15

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 16

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

Reserves = Required Reserve Ratio * Checkable Deposits
Reserves = 0.05 * $800 billion
Reserves = $40 billion

Excess Reserves = Total Reserves - Required Reserves
$0.8 billion = Total Reserves - $40 billion
Total Reserves = $40.8 billion

Money Multiplier = 1/Required Reserve Ratio
Money Multiplier = 1/0.05
Money Multiplier = 20

M1 Money Multiplier = Money Multiplier + 1
M1 Money Multiplier = 20 + 1
M1 Money Multiplier = 21

M1 = Currency + Checkable Deposits
M1 = $400 billion + $800 billion
M1 = $1.2 trillion

Total Money Supply = M1 * M1 Money Multiplier
Total Money Supply = $1.2 trillion * 21
Total Money Supply = $25.2 trillion

Therefore, the M1 money multiplier is 2.72.

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 M1 money multiplier is

Accepted Answer

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

Question 18

An increase in the monetary base that goes into ________ is not multiplied,while an increase that goes into ________ is multiplied.

Accepted Answer

The answer of An increase in the monetary base that...

Question 19

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 calculated by adding the currency in circulation to the total reserves held by banks. Since the required reserve ratio is 10 percent for $800 billion in checkable deposits, the required reserves are $80 billion (10% of $800 billion). Given that there are no excess reserves, the total reserves are $80 billion. Therefore, the monetary base is the sum of currency in circulation ($400 billion) and the total reserves ($80 billion), which equals $480 billion. However, since there are $0.8 billion in excess reserves, these should also be included, making the correct total $480.8 billion.

Question 20

Since the Federal Reserve sets the required reserve ratio to less than one,one dollar of reserves can support ________ of checkable deposits.

Accepted Answer

Since the required reserve ratio is less than one, one dollar of reserves can support more than one dollar of checkable deposits. The exact amount will depend on the required reserve ratio set by the Federal Reserve.

Quiz 14: The Money Supply Process

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 currency-deposit 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 excess reserves-checkable deposit ratio is

If the required reserve ratio is 10 percent,currency in circulation is $1,200 billion,checkable deposits are $1,600 billion,and excess reserves total $2,500 billion,then the M1 money multiplier is

If the Fed injects reserves into the banking system and they are held as excess reserves,then the money supply

The total amount of required reserves in the banking system is equal to the ________ the required reserve ratio and checkable deposits.

If the required reserve ratio is 10 percent,currency in circulation is $1,200 billion,checkable deposits are $1,600 billion,and excess reserves total $2,500 billion,then the excess reserves-checkable deposit ratio is

The total amount of reserves in the banking system is equal to the ________ required reserves and excess reserves.

An assumption in the model of the money supply process is that the desired levels of currency and excess reserves

An increase in the monetary base that goes into currency is ,while an increase that goes into deposits is .

If the Fed injects reserves into the banking system and they are held as excess reserves,then the monetary base and the money supply .

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.

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-deposit ratio 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 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 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

An increase in the monetary base that goes into is not multiplied,while an increase that goes into is multiplied.

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

Since the Federal Reserve sets the required reserve ratio to less than one,one dollar of reserves can support ________ of checkable deposits.