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Why Is Everything Else Held Constant An Increase In The Required Reserve

738 Words3 Pages

FIN243 Money and Banking Chapter 15 The Money Supply Process
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The three players in the money supply process include
A) banks, depositors, and the central bank. B) banks, depositors, and the U.S. Treasury.
C) banks, depositors, and borrowers. D) banks, borrowers, and the central bank.
2) When banks borrow money from the Federal Reserve, these funds are called
A) federal funds. B) discount loans. C) federal loans. D) Treasury funds.
3) When a bank buys a government bond from the Federal Reserve, reserves in the banking system ________ and the monetary base ________, everything else held constant.
A) increase; increases B) decrease; decreases …show more content…

B) $480 billion. C) $80 billion. D) $80.8 billion.
12) 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
A) 2.35. B) 0.551. C) 2.54. D) 2.67.
13) Everything else held constant, an increase in the required reserve ratio on checkable deposits will …show more content…

B) checkable deposits to rise.
C) the money supply to remain constant. D) the money supply to rise.
14) Everything else held constant, a decrease in the excess reserves ratio causes the M1 money multiplier to
________ and the money supply to ________.
A) decrease; increase B) decrease; decrease
C) increase; decrease D) increase; increase
15) Assuming initially that rr = 15%, c = 40%, and e = 5%, an increase in e to 10% causes the M1 money multiplier to ________, everything else held constant.
A) decrease from 2.33 to 2.15 B) increase from 2.15 to 2.33
C) decrease from 1.67 to 1.54 D) increase from 1.54 to 1.67
16) During the bank panics of the Great Depression the currency ratio
A) decreased sharply. B) increased slightly.
C) increased sharply. D) decreased slightly.
17) During the 2007-2009 financial crisis the excess reserve currency ratio
A) decreased slightly. B) decreased sharply.
C) increased slightly. D) increased sharply.
18) The increase in the availability of ATM's has caused the cost of acquiring currency to ________ which will cause the currency ratio to ________, everything else held constant.
A) increase; increase B) increase; decrease
C) decrease; decrease D) decrease; increase

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