Question

True or False:

1) The currency we use is considered a liability of our central bank (the Federal Reserve).

2) A central bank is quite profitable as its liabilities are virtually costless.

3) If the money supply is $10 million and the monetary base is $2 million, then the money multiplier must be 1/5.

4) If the currency ratio rises, the money supply will fall.

5) If interest rates are very low, we may expect banks to hold a lot of excess reserves.

Answer 1

Answer:

1)The currency we use is considered a liability of our central bank (the Federal Reserve).

Ans: true

2) A central bank is quite profitable as its liabilities are virtually costless.

Ans: true

3) If the money supply is $10 million and the monetary base is $2 million, then the money multiplier must be 1/5.

Ans: true

4) If the currency ratio rises, the money supply will fall.

Ans: true

5) If interest rates are very low, we may expect banks to hold a lot of excess reserves.

Ans: false