Question Group Exercise G due on Thu,Nov. 13, 5:00 p.m. on

08 Jun Question Group Exercise G due on Thu,Nov. 13, 5:00 p.m. on

Question
Group Exercise G due on Thu,Nov. 13, 5:00 p.m. on Blackboard

Chapter 14

1) The monetary base is equal to

A) all currency in circulation plus all deposits in financial institutions.

B) all currency in circulation plus checkable deposits in financial institutions.

C) all currency in circulation plus reserves held by banks.

D) checkable deposits in depository institutions plus reserves held by banks.

2) Which of the following is a liability of the Fed?

A) U.S. government securities

B) currency in circulation

C) discount loans to banks

D) checkable deposits in commercial banks

3) As of October 2012, the value of currency in circulation was about

A) $1.1 billion.

B) $11 billion.

C) $1.1 trillion.

D) $11 trillion.

4) Normally Fed’s portfolio of securities consists principally of

A) municipal bonds.

B) corporate bonds.

C) U.S. Treasury obligations.

D) obligations of foreign governments.

5) What is the most direct method the Fed uses to change the monetary base?

A) open market operations

B) changing the required reserve ratio

C) changing the federal funds rate

D) changing the level of discount loans

6) If the Fed purchases securities worth $10 million from a commercial bank, the banking system’s balance sheet will show

A) an increase in securities held of $10 million and an increase in bank reserves of $10 million.

B) an increase in securities held of $10 million and a decrease in bank reserves of $10 million.

C) a decrease in securities held of $10 million and an increase in bank reserves of $10 million.

D) a decrease in securities held of $10 million and a decrease in bank reserves of $10 million.

7) Although open market operations and discount loans both change the monetary base, the Fed has

A) greater control over open market operations than over discount loans.

B) greater control over discount loans than over open market operations.

C) very little control over either discount loans or open market operations.

D) complete control over both discount loans and open market operations.

8) On the books of the Fed the difference between borrowed reserves and discount loans is equal to

A) excess reserves.

B) required reserves.

C) currency in circulation.

D) zero; they are the same thing.

9) Most of the increase in the monetary base between 2007 and 2012 was due to increases in:

A) currency

B) bank deposits

C) excess reserves

D) Treasury bills

10) Suppose that the banking system currency has no excess reserves and that a bank receives a deposit into a checking account of $10,000 in currency. If the required reserve ratio is 0.20, what is the maximum amount that the banking system can lend out?

A) $8,000

B) $10,000

C) $40,000

D) $50,000

11) If the Fed purchases $1 million worth of securities and the required reserve ratio is 8%, by how much will deposits increase (assuming no change in excess reserves or the public’s currency holdings)?

A) rise by $1 million

B) decline by $1 million

C) rise by $8 million

D) rise by $12.5 million

12) Which of the following assumptions made in deriving the simple deposit multiplier is unrealistic?

A) The Fed sets the required reserve ratio.

B) The Fed is able to affect the level of reserves in the banking system.

C) Banks loan out all of their excess reserves.

D) The simple deposit multiplier is equal to 1 divided by the required reserve ratio.

13) Which of the following accurately describes the relationship between excess reserves and checkable deposits following the financial crisis of 2007-2009?

A) Excess reserves declined as the excess reserve ratio returned to near zero.

B) Excess reserves rose to nearly one-third of checkable deposits.

C) Excess reserves approached the same level as checkable deposits.

D) Excess reserves exceeded checkable deposits.

14) If banks hold no excess reserves, checkable deposits total $1.5 billion, currency totals $400 million, and the required reserve ratio is 10%, then the monetary base equals

A) $550 million.

B) $1.54 billion.

C) $1.9 billion

D) $15 billion.

15) If currency outstanding equals $500 million, checkable deposits equal $2 billion, reserves equal $200 million, and the required reserve ratio is 0.10, the money multiplier equals

A) 1.14.

B) 3.57.

C) 4.35.