Question 1

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

Accepted Answer

The required reserve ratio is a percentage, and checkable deposits are a dollar amount. To find the total amount of required reserves, we need to multiply the required reserve ratio by the checkable deposits. Therefore, the answer is the product of the required reserve ratio and checkable deposits.

Question 2

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 3

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 in circulation + checkable deposits
M1 = $400 billion + $1000 billion = $1400 billion

Simple deposit multiplier = 1 / required reserve ratio
Simple deposit multiplier = 1 / 0.1 = 10

M1 money multiplier = 1 + (excess reserves / desired reserves)
Desired reserves = required reserve ratio * checkable deposits
Desired reserves = 0.1 * $1000 billion = $100 billion

M1 money multiplier = 1 + ($1 billion / $100 billion) = 1.01

M1 = $1400 billion = $1000 billion * M1 money multiplier
M1 money multiplier = M1 / (checkable deposits)
M1 money multiplier = $1400 billion / $1000 billion = 1.4

Actual money multiplier = simple deposit multiplier * M1 money multiplier
Actual money multiplier = 10 * 1.4 = 14

Therefore, the M1 money multiplier is 2.8 (which is the reciprocal of 0.35, the decimal form of 35 percent).

Question 4

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 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-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 6

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

Accepted Answer

When an increase in the monetary base goes into currency, it is not multiplied because it is not held in banks and cannot be used as reserves to create more deposits through the money multiplier process. On the other hand, an increase in the monetary base that goes into deposits is multiplied because it can be used as reserves to create more deposits through the money multiplier process.

Question 7

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 8

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 9

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 in circulation + Checkable deposits
M1 = $400 billion + $800 billion = $1.2 trillion

Total reserves = Required reserves + Excess reserves
Total reserves = 0.05($800 billion) + $0.8 billion
Total reserves = $40 billion + $0.8 billion
Total reserves = $40.8 billion

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

M1 money supply = M1 money multiplier x Total reserves
M1 money supply = 20 x $40.8 billion
M1 money supply = $816 billion

Therefore, the M1 money multiplier is 2.72 (=$816 billion/$300 billion)

Question 10

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 amount of funds that banks are required to hold by law, while excess reserves are any reserves held above and beyond the required amount. Therefore, the sum of these two types of reserves equals the total amount of reserves in the banking system.

Question 11

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, each dollar of reserves can support more than one dollar of checkable deposits. The exact amount depends on the specific required reserve ratio set by the Federal Reserve.

Question 12

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 13

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

Accepted Answer

When the Fed injects reserves into the banking system and they are held as excess reserves, it does not lead to an increase in the money supply. This is because excess reserves are not used for lending and creating new deposits. Therefore, the money supply remains unchanged.

Question 14

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 15

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 bank reserves, which can be calculated as:

Monetary base = Currency in circulation + Bank reserves

We need to find the bank reserves to calculate the monetary base, which can be calculated as:

Bank reserves = Required reserve ratio * Checkable deposits
              = 0.1 * $800 billion
              = $80 billion

Excess reserves are given as $0.8 billion, so total reserves would be:

Total reserves = Bank reserves + Excess reserves
               = $80 billion + $0.8 billion
               = $80.8 billion

Therefore, the monetary base can be calculated as:

Monetary base = Currency in circulation + Total reserves
             = $400 billion + $80.8 billion
             = $480.8 billion

Thus, the best answer is B.

Question 16

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 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 currency-deposit ratio is

Accepted Answer

The formula for the currency-deposit ratio is:
Currency-deposit ratio = Currency in circulation / Checkable deposits

Using the given values:
Currency-deposit ratio = $400 billion / $800 billion = 0.50

Therefore, the answer is choice B.

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 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, the monetary base increases because the total amount of reserves in the banking system has increased. However, if these reserves are held as excess reserves (meaning banks choose not to lend them out), the money supply remains unchanged because the additional reserves do not translate into new loans and deposits, which would otherwise increase the money supply.

Question 20

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

Accepted Answer

The model of the money supply process assumes that the desired levels of currency and excess reserves grow proportionally with checkable deposits. This is also known as the deposit multiplier model, where an increase in checkable deposits leads to an increase in the money supply via a multiple expansion of deposits.

Quiz 17: The Money Supply Process

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 $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 M1 money multiplier 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 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

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

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

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

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

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

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 monetary base 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 excess reserves-checkable 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 currency-deposit ratio is

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

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

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