Question

1. The three players in the money supply process include

A. Banks, depositors and the US Treasury B. Banks, borrowers and the Fed

     C. Banks, depositors and the Fed D. Banks, depositors and borrowers

2. The monetary base consists of:

     A. Currency in circulation and Federal Reserve notes

     B. Currency in circulation and the US treasury’s monetary liabilities

     C. Currency in circulation and reserves

     D. Reserves and vault cash

3. When the Fed wants to increase reserves in the banking system, it will

      A. Purchase government bonds B. Sell government bonds C. Don’t

       extend discount loans   D. Print more money

4. In the simple deposit expansion model, if the Fed purchases $100 worth

      of bonds from a bank that previously had no excess reserves, deposits

      in the banking can potentially increase by:

A. $10  

B. $100

C. $100 times the reciprocal of the required reserve ratio (1/required reserve ratio of 10%)

D. $100 times the required reserve ratio

Answer 1

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