1. The size of the effect of a given deposit of cash into a demanddeposit accoun
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Question
1. The size of the effect of a given deposit of cash into a demanddeposit account on the money supply isgreater:
a. the greater the fraction of money people want to hold ascurrency and the greater the
fraction of deposits banks want to hold as excess reserves.
b. the greater the fraction of money people want to hold ascurrency and the smaller the
fraction of deposits banks want to hold as excess reserves.
c. the smaller the fraction of money people want to hold ascurrency and the greater the
fraction of deposits banks want to hold as excess reserves.
d. the smaller the fraction of money people want to hold ascurrency and the smaller the
fraction of deposits banks want to hold as excess reserves.
2. The money supply would tend to rise if:
a. banks decide to keep more excess reserves and people convertmore of their demand
deposits to currency.
b. banks decide to keep more excess reserves and people depositcurrency in their demand
deposit accounts.
c. banks decide to keep fewer excess reserves and people depositcurrency in their demand
deposit accounts.
d. banks decide to keep fewer excess reserves and people convertmore of their demand
deposits to currency.
3. If banks faced a 100 percent reserve requirement, the moneymultiplier would be:
a. 0.01.
b. 0.1.
c. 1.
d. 10.
e. 100.
4. If banks faced a 100 percent reserve requirement, a $10,000addition to banking reserves would increase the money supplyby:
a. $100.
b. $1,000.
c. $10,000.
d. $100,000.
e. $1,000,000.
5. On a certain date the banking system had $2 billion in excessreserves. The legally required reserve ratio was 12.5 percent.Potentially, if these funds were fully loaned out, the bankingsystem as a whole could increase the money supply by a maximumof:
a. $2 billion.
b. $2.5 billion.
c. $12.5 billion.
d. $16 billion
e. $25 billion.
Explanation / Answer
2.B 3.B 4.A 5.CRelated Questions
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