101) 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.
102) ________ 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
103) 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
104) 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
105) 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
106) 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) the Fed and the U.S. Congress
107) 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.
108) As a result of the Fed’s actions during the 2008 financial crisis and banks’ lending policies, the money multiplier ________ as a direct result of the ________.
A) fell from about 9 to about 4; surge in banks’ desired reserve ratios as they took on less risk
B) rose from about 4 to about 9; surge in banks’ desired reserve ratios as they took on less risk
C) fell from about 9 to about 4; low risk experienced by banks because of the FDIC increasing their default coverage amounts
D) rose drastically; consistent decrease in banks’ desired reserve ratios as they took on less risk
E) decreased drastically; consistent decrease in banks’ desired reserve ratios as they took on less risk
109) As of 2013, the U.S. monetary base has ________ its 2007 level, the level held before the 2008 financial crisis, as a direct result of ________.
A) quadrupled; the Fed’s actions with quantitative easing
B) doubled; the Fed’s actions with quantitative easing
C) tripled; the Fed’s actions with quantitative easing
D) quadrupled; the Fed’s actions and the resulting reduction of the money multiplier
E) tripled; the Fed’s actions and the resulting reduction of the currency drain
110) The M2 multiplier in the United States is currently about
A) 1.
B) 4.
C) 16.
D) 50.
E) 23.
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