Question :
91) If the Fed buys $10 million of government securities : 1227832
91) If the Fed buys $10 million of government securities when the desired reserve ratio is 20 percent and the currency drain ratio is 5 percent, the quantity of money
A) increases by $42 million.
B) increases by $50 million.
C) decreases by $42 million.
D) decreases by $50 million.
E) increases by $7.5 million.
Answer: A
Topic: Money multiplier
Skill: Level 5: Critical thinking
Section: Checkpoint 11.4
Status: TPS
92) Which of the following reduces the money multiplier?
A) Banks loan all their excess reserves.
B) Bank customers hold some of the loan proceeds as currency outside the banking system.
C) The Fed reduces the required reserve ratio.
D) Banks impose a currency drain on bank customers.
E) The Fed sells U.S. government securities.
Answer: B
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: CT
93) The quantity of money decreases if
A) the currency drain ratio increases.
B) the desired reserve ratio decreases.
C) banks loan all excess reserves.
D) the Treasury Department issues fewer government securities.
E) the Fed buys U.S. government securities.
Answer: A
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: CT
94) ________ in the currency drain ratio and ________ in the desired reserve ratio ________ the money multiplier.
A) An increase; an increase; increase
B) An increase; a decrease; decrease
C) A decrease; an increase; decrease
D) A decrease; a decrease; increase
E) An increase; a decrease; increase
Answer: D
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: WM
95) An increase in the currency drain ratio ________.
A) increases the size of the money multiplier
B) decreases the size of the money multiplier
C) increases the deposits in all banks
D) decreases the size of the monetary base
E) increases the size of the monetary base
Answer: B
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: TPS
96) An increase in the currency drain ratio
A) decreases the size of the money multiplier.
B) increases the size of the money multiplier.
C) increases the money supply.
D) decreases the required reserve ratio.
E) increases the desired reserve ratio.
Answer: A
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: RS
97) If there is an increase in the amount of currency held outside banks, then the
A) monetary base will decrease.
B) quantity of money will increase.
C) quantity of money and the monetary base will decrease.
D) quantity of money will decrease.
E) quantity of money will not change.
Answer: D
Topic: Size of money multiplier
Skill: Level 1: Definition
Section: Checkpoint 11.4
Status: NAU
98) An increase in the currency drain ratio
A) decreases the monetary base.
B) increases the quantity of money.
C) increases bank reserves.
D) does not change the amount of the monetary base.
E) does not change the quantity of money.
Answer: D
Topic: Size of money multiplier
Skill: Level 1: Definition
Section: Checkpoint 11.4
Status: DMC
99) An increase in the currency drain ratio
A) decreases the quantity of money.
B) decreases the monetary base.
C) increases banks’ reserves.
D) increases banks’ deposits.
E) has no effect on the amount of the monetary base or the quantity of money.
Answer: A
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: DMC
100) ________ increases the size of the money multiplier.
A) An increase in the currency drain ratio
B) An open market purchase of government securities by the Fed
C) A reduction in the desired reserve ratio
D) An open market sale of government securities by the Fed
E) An increase in the size of open market operations
Answer: C
Topic: Size of money multiplier
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: TPS
