Date: 11/16/2017 PART 1 (80 Points) MULTIPLE CHOICE. Choose the one alternative

Question

Date: 11/16/2017 PART 1 (80 Points) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. and 1) 1) When the Federal Reserve extends a discount loan to a bank, the monetary base reserves A) increases; remain unchanged C) increases; increase B) remains unchanged; decrease D) remains unchanged; increase 2) 2) If reserves in the banking system increase by $100, then checkable deposits will increase by $1000 in the simple model of deposit creation when the required reserve ratio is A) 0.01 B) 0.20 C) 0.10. D) 0.05 3) 3) In the simple derposit expansion model if the required reserve ratio is 10 percent and the Fed increases reserves by $100, checkable deposits can potentially expand by A) $100. B) $250. C) $500 D) $1,000. 4) When the Fed buys $100 worth of bonds from a primary dealet, reserves in the banking system 4) A) increase by $100 C) decrease by $100 B) increase by more than $100 D) decrease by more than $100. 5 5) Reserves are equal to the sum of A) required reserves and vault cash reserves. B) required reserves and excess reserves. C) excess reserves and vault cash reserves. D) vault cash reserves and total reserves 6) When the Federal Reserve sells a government bond to a primary dealer, reserves in monetary base everything else held constant. A) increase; increases C) decrease; increases B) increase; decreases D) decrease; decreases 7) If the required reserve ratio is 10 percent, currency in circulation is $400 billion, checkable 7) A) 2.5. B) 0.601 C) 2.0 D) 1.67. 8) Suppose a person cashes his payroll check and holds all the funds in the form of currency 8) Everything else held constant, total reserves in the banking system and the monetary A) decrease; increases C) decrease; remains unchanged B) decrease; decreases D) remain unchanged, increases

Explanation / Answer

Then the checkable deposit increase by 100/(10/100) = 1000

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