d. money market mutual deposits. 16. Assume the required reserve ratio is 10 per
ID: 1110059 • Letter: D
Question
d. money market mutual deposits. 16. Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 millic rnment securities from member banks. If the oversimplified money multiplier is assumed, then the mone a. increase by $500 million. b. increase by $100 million. c. decrease by $100 million. supply will d. decrease by $500 million 17. The M2 definition of the money supply is based on the concept that a. Mi is a small number, and should be increased in size. b. many types of deposits can be used as both payments and stores of value c. checking deposits are used for payments, and therefore, not part of M. d. cash is not used for the majority of payments. 18. Fractional reserve banking takes its name from the fact that banks a. hold only a fraction of their reserves at the bank itself. b. keep only a fraction of their total deposits on reserve. c. lend only a fraction of their total reserves to customers d. reserve only a fraction of their activity for lendingExplanation / Answer
16. a)Incraese in money supply by (10*50) =500
17. b) M2 has greater number of options for money.
18. b) Reserve a fraction of total deposits that cannot be lend out
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