negatively

ueng

1)Ifrervesinthebankingsystemincreaby$100,thencheckabledepositswillincreaby$500inthesimple

modelofdepositcreationwhentherequiredrerveratiois

A)0.01.B)0.10.C)0.05.D)0.20

2)Inthesimpledepositexpansionmodel,ifthebankingsystemhaxcessrervesof$75,andtherequired

rerveratiois20%,thepotentialexpansionofcheckabledepositsis

A)$75.B)$750.C)$37.50.D)$375.

3)Ifrervesinthebankingsystemincreaby$100,thencheckabledepositswillincreaby$2,000inthesimple

modelofdepositcreationwhentherequiredrerveratiois

A)0.01.B)0.05.C)0.10.D)0.20.

4)Inthesimpledepositexpansionmodel,anexpansionincheckabledepositsof$1,000whentherequiredrerve

ratioiqualto20percentimpliesthattheFed

A)sold$200ingovernmentbonds.B)sold$500ingovernmentbonds.

C)purchad$200ingovernmentbonds.D)purchad$500ingovernmentbonds.

5)Theratiothatrelatesthechangeinthemoneysupplytoagivenchangeinthemonetarybaiscalledthe

A)moneymultiplier.B)depositratio.

C)requiredrerveratio.D)discountrate.

6)Theequationlinkingthemonetarybatothelevelsofcheckabledepositsandcurrencyis

A)MB

=

R

+

C.

B)MB

=

(r

×

D)

+

ER.

C)MB

=

(r

×

D)

+

ER)

+

C.

D)bothAandBarecorrect.

E)bothAandCarecorrect.

7)Anincreainthemonetarybathatgoesinto_____isnotmultiplied,whileanincreathatgoesinto_____is

multiplied.

A)deposits;currency

B)deposits;excessrerves

C)currency;deposits

D)excessrerves;currency

E)currency;excessrerves

8)DuringtheChristmasholidayason,

impliesthat

A)discountborrowingfallsduringtheChristmasason.

B)themoneymultiplierrisduringtheChristmasason.

C)themoneymultiplierfallsduringtheChristmasason.

D)excessrervesfallduringtheChristmasason.

E)noneoftheaboveoccur.

9)Theformulaforthemoneymultiplierthatincludexcessrervesandcurrencyis

A)m

=

(1/(r

+

e

+

c))

×

MB.

B)M

=

(1

+

c)/(r

+

e

+

c).

C)m

=

(1

+

c)/(r

+

e

+

c).

D)D

=

1/(r

+

e

+

c).

E)M

=

1/(r

+

e

+

c).

10)IftheFedinjectsrervesintothebankingsystemandtheyareheldaxcessrerves,thenthemoneysupply

A)increasbyonlytheinitialincreainrerves.

B)doesnotchange.

C)increasbyamultipleoftheinitialincreainrerves.

D)increasbyonlyone

-

halftheinitialincreainrerves.

11)Theformulaforthemoneysupplythatincludexcessrervesandcurrencyis

A)D

=

1/(r

+

e

+

c).

B)D

=

(1/(r

+

e

+

c))

×

MB.

C)M

=

(1

+

c)/(r

+

e

+

c).

D)M

=

((1

+

c)/(r

+

e

+

c))

×

MB.

E)m

=

1/(r

+

e

+

c).

12)Iftherequiredrerveratiois10percent,currencyincirculationis$400billion,checkabledepositsare$800

billion,andexcessrervestotal$0.8billion,thenthemoneysupplyis

A)$1200.8.B)$8400.C)$1200.D)$8000.

13)Iftherequiredrerveratiois10percent,currencyincirculationis$400billion,checkabledepositsare$800

billion,andexcessrervestotal$0.8billion,thenthemonetarybais

A)$80.8billion.B)$80billion.C)$480billion.D)$480.8billion.

14)Iftherequiredrerveratiois10percent,currencyincirculationis$400billion,checkabledepositsare$1000

billion,andexcessrervestotal$1billion,thenthemoneymultiplierisapproximately

A)2.5.B)2.0.C)0.7.D)2.8.

15)Iftherequiredrerveratioisone

-

third,currencyincirculationis$300billion,andcheckabledepositsare$900

billion,thenthemoneysupplyis

A)$1800.B)$1200.C)$2700.D)$3000.

16)Iftherequiredrerveratiois10percent,currencyincirculationis$400billion,checkabledepositsare$800

billion,andexcessrervestotal$0.8billion,thenthecurrencydepositratiois

A)0.25.B)0.50.C)0.40.D)0.05.

17)Everythingelheldconstant,adecreainthecurrency

-

checkabledepositratiowillmean

A)anincreaincurrencyincirculationandanincreainthemoneysupply.

B)anincreainmoneysupply.

C)adecreainthemoneysupply.

D)anincreaincurrencyincirculationbutnochangeinthemoneysupply.

18)Comparisonofthesimplemodelofmoneycreationwiththemoneysupplymodelaccountingfordepositorand

bankbehaviorindicatesthat

A)anincreainthemonetarybathatgoesintocurrencyisnotmultiplied.

B)themoneymultiplierisnegativelyrelatedtothecurrencyratio.

C)themoneymultiplierispositivelyrelatedtotheexcessrerveratio

D)alloftheaboveoccur.

E)onlyAandBoftheabove.

19)Foragivenlevelofthemonetaryba,anincreaintherequiredrerveratiooncheckabledepositswillmean

A)anincreaindiscountborrowing.B)anincreainthemoneysupply.

C)adecreainthemoneysupply.D)anincreaincheckabledeposits.

20)Themoneymultiplierissmallerthanthesimpledepositmultiplierwhen

A)thecurrency

-

checkabledepositratioiszeroandbankschoonottoholdexcessrerves..

B)thecurrency

-

checkabledepositratioisgreaterthanzero.

C)bankschootoholdexcessrerves.

D)onlyBandCoftheabovearetrue.

E)onlyAandBoftheabovearetrue.

21)Assuminginitiallythatr

=

10%,c

=

40%,ande

=

0,anincreainrto15%caus

A)themoneymultipliertodecreafrom2.8to2.55.

B)themoneymultipliertodecreafrom2to1.82.

C)themoneymultipliertoincreafrom1.82to2.

D)themoneymultipliertoincreafrom2.55to2.8.

E)nochangeinthemoneymultiplier.

22)Foragivenlevelofthemonetaryba,anincreainthecurrency

-

checkabledepositratiowillmean

A)anincreaincurrencyincirculationbutnochangeinthemoneysupply.

B)anincreainmoneysupplybutnochangeinrerves.

C)adecreainthemoneysupply.

D)anincreaincurrencyincirculationandanincreainthemoneysupply.

23)Allelbeingconstant,whenbanksincreatheirholdingsofexcessrerves,

A)themoneysupplyfallsbyanamountequaltotheincreadholdingsofexcessrerves.

B)themoneysupplyfallsbyamultipleoftheincreadholdingsofexcessrerves.

C)themonetarybafallsbyanamountequaltotheincreadholdingsofexcessrerves.

D)noneoftheabovewilloccur.

24)Themoneysupplyis________relatedtoexpecteddepositoutflows,andis________relatedtothemarket

interestrate.

A)negatively;negativelyB)negatively;positively

C)positively;negativelyD)positively;positively

25)Themoneymultiplieris

A)negativelyrelatedtohigh

-

poweredmoney.B)positivelyrelatedtotheexcessrervesratio.

C)negativelyrelatedtotherequiredrerveratio.D)positivelyrelatedtoholdingsofexcessrerves.

26)Theexcessrervesratiois________relatedtoexpecteddepositoutflows,andis________relatedtothemarket

interestrate.

A)negatively;negativelyB)negatively;positively

C)positively;negativelyD)positively;positively

27)Factorsthatcautheexcessrervesratiotoriinclude:

A)ariinexpecteddepositoutflows.

B)adeclineinmarketinterestrates.

C)ariinmarketinterestrates.

D)onlyAandBoftheabove.

E)onlyAandCoftheabove.

28)Themoneymultiplierisnegativelyrelatedto

A)discountborrowingsfromtheFed.B)high

-

poweredmoney.

C)theexcessrervesratio.D)bothAandBoftheabove.

29)Themoneymultiplierisnegativelyrelatedto

A)thecurrency

-

checkabledepositratio.

B)therequiredrerveratio.

C)discountborrowingsfromtheFed.

D)alloftheabove.

E)bothAandBoftheabove.

30)Factorsthatincreathevalueofthemoneymultiplierinclude

A)anincreainthecurrencyratio.

B)anincreaintheexcessrerveratio.

C)anincreaintherequiredrerveratio.

D)anincreaindiscountloans.

E)adecreaintherequiredrerveratio.

31)Themoneymultiplierisinverlyrelatedto

A)thecurrencyratio.

B)theexcessrerveratio.

C)therequiredratiooncheckabledeposits.

D)alloftheabove.

E)bothAandBoftheabove.

32)Factorsthatcauadeclineinthemoneymultiplierinclude:

A)anincreaoftherequiredrerveratio.B)adeclineinexpecteddepositoutflows.

C)anincreainthemarketinterestrate.D)onlyAandBoftheabove.

33)Factorsthatcauadeclineinthemoneymultiplierinclude:

A)aloweringoftherequiredrerveratio.B)adecreainthemarketinterestrate.

C)anincreainexpecteddepositoutflows.D)onlyBandCoftheabove.

34)Theamountofdiscountloansis_____relatedtothediscountrate,andis_____relatedtothemarketinterest

rate.

A)positively;positivelyB)positively;negatively

C)negatively;positivelyD)negatively;negatively

35)A_____inmarketinterestratesrelativetothediscountratewillcaudiscountborrowingto_____

A)ri;remainunchangedB)fall;increa

C)ridecreaD)ri;increa

36)Otherthingqual,risingmarketinterestratencouragebanksto

A)increadiscountborrowingsfromtheFed.

B)holdmoreexcessrerves.

C)holdfewerexcessrerves.

D)dobothAandBoftheabove.

E)dobothAandCoftheabove.

37)Allelconstant,ariinmarketinterestratesleadsto

A)ariindiscountborrowingandariinthemoneysupply.

B)afallinexcessrervesandafallinthemoneysupply.

C)ariinexcessrervesandariinthemoneysupply.

D)afallindiscountborrowingandariinthemoneysupply.

E)noneoftheabove.

38)Themoneysupplyis_____relatedtoexcessrervesratio,andis_____relatedtothecurrencyratio.

A)positively;positivelyB)positively;negatively

C)negatively;positivelyD)negatively;negatively

39)Factorsthatcauanincreainthemoneysupplyinclude:

A)aloweringoftherequiredrerveratio.B)adeclineinthediscountloanrate.

C)anincreainthemarketinterestrate.D)alloftheabove.

40)DuringthebankpanicsoftheGreatDepression,andtoalesrextentin1893and1907,

A)thecurrency

-

checkabledepositsratiodeclinedmodestly,confirmingthatthetheoryofastdemand

providesathecorrectframeworkforunderstandingfluctuationsinthecurrency

-

checkabledepositsratio.

B)thecurrency

-

checkabledepositsratiodidnotchange,confirmingthatthetheoryofastdemand

providesathecorrectframeworkforunderstandingfluctuationsinthecurrency

-

checkabledepositsratio.

C)thecurrency

-

checkabledepositsratiodecreadsharply.

D)thecurrency

-

checkabledepositsratioincreadsharply.

41)Intheearly1930s,thecurrencyratioro,upplyanalysispredicts

that,allelconstant,themoneysupplyshouldhave

A)rin.

B)remainunchanged.

C)fallen.

D)Anyoftheabovearepossible,sincethetwofactorsworkinoppositedirections.

42)DuringthebankingpanicthatoccurredbetweenOctober1930andJanuary1931,

A)themoneysupplydeclinedsharply.

B)bothcurrencyratioandexcessrerveratioro.

C)excessrerveratiomorethandoubled.

D)alloftheaboveoccurred.

E)onlyAandBoftheaboveoccurred.

43)DuringthebankingcrisisthatendedinMarch1933,

A)bothcurrencyratioandexcessrerveratioro.

B)themoneysupplydeclineddespitea20percentriinthemonetaryba.

C)themoneysupply(M1)haddeclinedbyover25percent



byfarthelargestdeclineinAmericanhistory.

D)alloftheabove.

44)Duringthe2007

-

2009financialcrisisthecurrencyratio

A)increadsharply.B)decreadsharply.C)increadslightly.D)decreadslightly.

45)Duringthe2007

-

2009financialcrisistheexcessrerveratio

A)increadsharply.B)decreadsharply.C)increadslightly.D)decreadslightly.

AnswerKey

Testname:CH17

1)D

2)D

3)B

4)C

5)A

6)E

7)C

8)C

9)C

10)B

11)D

12)C

13)D

14)D

15)B

16)B

17)B

18)E

19)C

20)D

21)A

22)C

23)B

24)B

25)C

26)C

27)D

28)C

29)E

30)E

31)D

32)A

33)D

34)C

35)D

36)E

37)A

38)D

39)D

40)D

41)C

42)D

43)D

44)D

45)A