Question : 111) During the 2008 financial crisis, banks restricted ________, and : 1240459

 

 

111) 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

 

112) 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.

113) 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.

 

114) 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.

 

115) 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.

116) 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

 

117) 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

 

118) 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.

119) 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) $615,416

E) $465,116

 

11.5   Integrative Questions

 

1) Money market mutual funds

A) are included in M2 but not M1.

B) are included in M1 but not M2.

C) are included in M1 and M2.

D) are the largest part of the monetary base.

E) None of the above is correct.

 

2) Which of the following financial institutions does NOT have to meet minimum reserve ratios?

i.the Fed

ii.commercial banks

iii.credit unions

A) i only

B) ii only

C) iii only

D) ii and iii

E) i, ii, and iii

3) If the desired reserve ratio increases, then

A) banks’ desired reserves increase and their excess reserves decrease.

B) bank customers become more willing to make deposits in banks.

C) banks are able to make more loans.

D) banks can buy more government securities.

E) the Fed has supplied banks with more reserves.

 

4) If the desired reserve ratio decreases, then

A) banks’ desired reserves increase and their excess reserves decrease.

B) bank customers become more willing to make deposits in banks.

C) banks are able to make more loans.

D) banks are forced to buy fewer government securities.

E) banks’ desired reserves decrease and their excess reserves do not change.

 

5) If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 20 percent and the currency drain ratio is 5 percent, the bank can loan a maximum of

A) $75,000.

B) $80,000.

C) $100,000.

D) $95,000.

E) $85,000.

6) If the Fed buys a $100,000 government security from a bank when the desired reserve ratio is 10 percent and the currency drain ratio is 50 percent, the bank can loan a maximum of

A) $50,000.

B) $40,000.

C) $100,000.

D) $90,000.

E) $60,000.