Question :
101) If the monetary base does not change and the : 1227834
101) If the monetary base does not change and the desired reserve ratio increases, the money multiplier ________ and the quantity of money ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) decreases; does not change
Answer: D
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: MR
102) The ________ the desired reserve ratio, the ________ the ________ in the quantity of money created from an initial increase of $100,000 in the monetary base.
A) larger; larger; decrease
B) larger; larger; increase
C) larger; smaller; decrease
D) smaller; larger; decrease
E) smaller; larger; increase
Answer: E
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: MR
103) When part of a bank loan does not return to the banking system but rather remains outside the banking system as currency, then the money multiplier ________ in size and the amount of money created by an open market operation ________.
A) increases; decreases
B) does not change; increases
C) decreases; decreases
D) increases; increases
E) decreases; does not change
Answer: C
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: WM
104) Decisions of ________ determine the magnitude of the monetary multiplier.
A) only the Fed
B) only the public
C) both the Fed and the public
D) neither the Fed nor the public
E) Fed and the U.S. Congress
Answer: C
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: AA
105) As a result of the Fed’s actions during the 2008 financial crisis and banks’ lending policies,
A) the M2 money multiplier has fallen from about 9 to about 4.
B) the M2 money multiplier more than doubled.
C) the monetary base decreased by 50 percent.
D) the ratio of currency to M2 deposits more than doubled.
E) the reserve requirement ratio increased.
Answer: A
Topic: Eye on creating money
Skill: Level 4: Applying models
Section: Checkpoint 11.4
Status: Revised
106) The M2 multiplier in the United States is currently about
A) 1.
B) 4.
C) 16.
D) 50.
E) 23.
Answer: B
Topic: Eye on creating money
Skill: Level 1: Definition
Section: Checkpoint 11.4
Status: Revised
107) During the 2008 financial crisis, banks restricted ________, and the M2 money multiplier ________.
A) lending; decreased
B) lending; increased
C) deposits; increased
D) buying securities; increased
E) deposits; decreased
Answer: A
Topic: Eye on creating money
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: CD new
108) Excess reserves are the
A) same as the required reserves.
B) amount of reserves the Fed requires banks to hold.
C) amount of reserves held over what is desired.
D) amount of reserves a bank holds at the Fed.
E) amount of reserves banks keep in their vaults.
Answer: C
Topic: Excess reserves
Skill: Level 1: Definition
Section: Checkpoint 11.4
Status: STUDY GUIDE
109) Banks can make loans up to an amount equal to their
A) total deposits.
B) total reserves.
C) required reserves.
D) excess reserves.
E) total government securities.
Answer: D
Topic: Excess reserves
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: STUDY GUIDE
110) If the Fed buys government securities, then
A) the quantity of money is not changed, just its composition.
B) new bank reserves are created.
C) the quantity of money decreases.
D) bank reserves are destroyed.
E) banks’ excess reserves decrease.
Answer: B
Topic: Open market operation
Skill: Level 1: Definition
Section: Checkpoint 11.4
Status: STUDY GUIDE
111) The Citizens First Bank sells $100,000 of government securities to the Fed. This sale immediately
A) decreases the quantity of money.
B) decreases the bank’s checkable deposits.
C) increases the bank’s reserves.
D) decreases the bank’s assets.
E) increases the bank’s required reserves.
Answer: C
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: STUDY GUIDE
112) When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves ________, bank deposits ________, and the quantity of money ________.
A) decrease; decrease; decreases
B) increase; do not change; increases
C) decrease; increase; does not change
D) do not change; increase; increases
E) increase; increase; increases
Answer: E
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: STUDY GUIDE
113) A currency drain is cash ________ and has ________ effect on the money multiplier.
A) draining into the banks; no
B) draining into the banks; an
C) held outside the banks; an
D) held at the Fed; an
E) held as reserves; no
Answer: C
Topic: Currency drain
Skill: Level 1: Definition
Section: Checkpoint 11.4
Status: STUDY GUIDE
114) The money multiplier is used to determine how much the
A) monetary base increases when the Fed purchases government securities.
B) quantity of money increases when the monetary base increases.
C) monetary base increases when the quantity of money increases.
D) quantity of money increases when the required reserve ratio increases.
E) monetary base increases when the Fed sells government securities.
Answer: B
Topic: Money multiplier
Skill: Level 1: Definition
Section: Checkpoint 11.4
Status: STUDY GUIDE
115) The Fed makes an open market operation purchase of $200,000. The currency drain ratio is 33.33 percent and the desired reserve ratio is 10 percent. By how much does the quantity of money increase?
A) $800,000
B) $333,333
C) $2,000,000
D) $618,604
E) $465,116
Answer: D
Topic: Money multiplier
Skill: Level 5: Critical thinking
Section: Checkpoint 11.4
Status: STUDY GUIDE
