Finance 320 Chapter 14

The monetary base is equal toA.all currency in circulation plus reserves held by banks.B.all currency in circulation plus checkable deposits in financial institutions.C.all currency in circulation plus all deposits in financial institutions.D.checkable deposits in depository institutions plus reserves held by banks. A
Which of the following is an asset of the​ Fed?A.checkable deposits in commercial banksB.currency in circulationC.discount loans to banksD.reserves of banks C
Which of the following is a liability of the​ Fed?A.U.S. government securitiesB.reservesC.discount loans to banksD.checkable deposits in commercial banks B
Vault cash is​ a(an)A.liability of the Fed and is not counted as reserves.B.liability of the Fed and is counted as reserves.C.asset of the Fed and is counted as reserves.D.asset of the Fed and is not counted as reserves. B
In October​ 2012, the largest liability of the Fed wasA.vault cash.B.discount loans to banks.C.currency in circulation.D.reserves. D
Reserves equalA.deposits with the Fed plus vault cash.B.deposits with the Fed plus holdings of U.S. government securities.C.currency in circulation plus vault cash.D.currency outstanding plus currency in circulation. A
The primary assets of the Fed areA.discount loans and government securities.B.discount loans and reserves.C.government securities and reserves.D.discount loans and open market operations. A
The​ Fed’s portfolio of securities consists principally ofA.municipal bonds.B.obligations of foreign governments.C.corporate bonds.D.U.S. Treasury obligations. D
When the Fed extends loans to depository institutionsA.it decreases the level of reserves.B.it reduces the total value of the assets on its balance sheet.C.it increases the level of reserves.D.it reduces the total value of the liabilities on its balance sheet. C
When the Fed lends to depository​ institutions, the loans are calledA.repurchase agreements.B.discount loans.C.reverse repurchase agreements.D.federal funds. B
Open market operations generally involveA.the Fed buying and selling common stock in order to affect the liquidity of the stock market.B.the Fed making discount loans to depository institutions.C.the Fed buying and selling U.S. government securities.D.private investors buying and selling securities directly on​ exchanges, rather than through brokers. C
If the Fed purchases securities worth​ $10 million from a commercial​ bank, the banking​ system’s balance sheet will showA.an increase in securities held of​ $10 million and a decrease in bank reserves of​ $10 million.B.a decrease in securities held of​ $10 million and an increase in bank reserves of​ $10 million.C.a decrease in securities held of​ $10 million and a decrease in bank reserves of​ $10 million.D.an increase in securities held of​ $10 million and an increase in bank reserves of​ $10 million. B
A​ $10 million open market purchase will increase the monetary base byA.​$10 million times the money multiplier.B.​$10 million divided by the money multiplier.C.an amount between​ $0 and​ $10 million, depending on the fraction of the purchase the public wishes to hold as currency.D.​$10 million. D
In managing the monetary​ base, the Fed most often usesA.printing money.B.discount loans.C.tax increases.D.open market purchases. D
If the Fed makes a discount loan of​ $2 million to a commercial​ bank, the​ Fed’s balance sheet will showA.a decrease in discount loans of​ $2 million and an increase in bank reserves of​ $2 million.B.an increase in discount loans of​ $2 million and a decrease in bank reserves of​ $2 million.C.a decrease in discount loans of​ $2 million and a decrease in bank reserves of​ $2 million.D.an increase in discount loans of​ $2 million and an increase in bank reserves of​ $2 million. D
When​ economists, policymakers, or journalists refer to the​ Fed’s balance​ sheet, they are typically referring to​ the:A.money supplyB.amount of bank reservesC.size of the​ Fed’s assetsD.amount of foreign reserves C
Between late 2007 and​ 2012, the​ Fed’s balance​ sheet:A.more than tripledB.more than doubledC.remained about the sameD.rose tenfold A
If the Fed purchases​ $50,000 in T-bills from a​ bank, by how much will the​ bank’s excess reserves​ increase?A.by​ $50,000B.by​ $50,000 times the required reserve ratioC.by​ $50,000 divided by the required reserve ratioD.not enough information has been provided to answer the question. A
What is the maximum amount a bank can​ lend?A.its excess reserves divided by the required reserve ratioB.the value of its checkable deposits times the required reserve ratioC.its excess reservesD.its total reserves C
Suppose that a bank with no excess reserves 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 bank can lend​ out?A.​$8,000B.​$10,000C.​$2,000D.​$50,000 A
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.​$50,000B.​$8000C.​$40,000D.​$10,000 C
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.decline by​ $1 millionB.rise by​ $12.5 millionC.rise by​ $8 millionD.rise by​ $1 million B
Which of the following assumptions made in deriving the simple deposit multiplier is​ unrealistic?A.The Fed sets the required reserve ratio.B.The simple deposit multiplier is equal to 1 divided by the required reserve ratio.C.The Fed is able to affect the level of reserves in the banking system.D.Banks loan out all of their excess reserves. D
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 equalsA.​$1.9 billionB.​$1.54 billion.C.​$15 billion.D.​$550 million. D
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 equalsA.4.35.B.1.14.C.5.D.3.57. D
Why​ didn’t the surge in the monetary base between 2008−2012 lead to a similar surge in the money​ supply?A.The excess​ reserve-deposit ratio rose​ significantly, resulting in a much smaller money multiplier.B.Nonborrowed reserves​ declined, offsetting the increase in the monetary base.C.The​ currency-deposit ratio rose​ significantly, resulting in a much smaller money multiplier.D.The Fed increase the required reserve​ ratio, resulting in a much smaller money multiplier. A

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