This file of ECO 316 Week 3 Chapter 17 The Money Supply Process shows the solutions to the following problems:

17.1 Multiple Choice Questions

1) The British central bank is known as

2) The Japanese central bank is known as

3) The central bank for the countries who have adopted the euro as their currency is known as

4) The aggregate M1 consists of

5) The monetary base is equal to

6) Which of the following is a liability of the Fed?

7) Which of the following is an asset of the Fed?

8) Which of the following is a liability of the Fed?

9) Most of the reserves of the banking system are held as

10) What do we need to add to Federal Reserve currency in circulation and bank reserves in order to arrive at the monetary base?

11) The currency of the United States is issued by

12) The difference between currency outstanding and currency in circulation is equal to

13) Vault cash is a(an)

14) The largest liability of the Fed is

15) As of July 2006, the value of currency in circulation was about

16) As of July 2006, which of the following was true?

17) Reserve deposits are

18) Reserves equal

19) The percentage of deposits that banks must hold as reserves is called the

20) The Fed pays interest on

21) Why do banks avoid holding excess reserves?

22) Banks prefer to hold their liquid balances as

23) The primary assets of the Fed are

24) The Fed’s portfolio of securities consists principally of

25) When the Fed holds U.S. government securities, it

26) Most of the earnings that the Fed receives on interest from government securities are

27) When the Fed extends loans to depository institutions

28) When the Fed lends to depository institutions, the loans are called

29) The interest rate the Fed charges on loans to depository institutions is known as

30) What is the most direct method the Fed uses to change the monetary base?

31) Open market operations involve

32) If the Fed buys securities worth $10 million, then

33) If the Fed purchases securities worth $10 million from a commercial bank, the banking system’s balance sheet will show

34) If the Fed purchases $1 million in securities from the nonbank public, the monetary base will rise by $1 million

35) A $10 million open market purchase will increase the monetary base by

36) A $10 million open market purchase will increase bank reserves by

37) A $10 million open market sale will decrease the monetary base by

38) A $10 million open market sale will decrease the reserves of the banking system by

39) If the Fed sells securities worth $10 million to a commercial bank, the Fed’s balance sheet will show

40) In managing the monetary base, the Fed most often uses

41) If the Fed makes a discount loan of $2 million to a commercial bank, the Fed’s balance sheet will show

42) Although open market operations and discount loans both change the monetary base, the Fed has

43) Which of the following statements is correct?

44) Which of the following statements is correct?

45) When banks borrow on the federal funds market

46) On the books of the Fed the difference between borrowed reserves and discount loans is equal to

47) Which of the following expressions is correct?

48) If the Fed purchases $50,000 in T-bills from a bank, by how much will the bank’s excess reserves increase?

49) What is the maximum amount a bank can lend?

50) Suppose that a bank with no excess reserves receives a deposit into a checking account of $10,000 in currency. If the required reserve ratio is 0.20, what is the maximum amount that the bank can lend out?ECO 316 Week 3 Chapter 18 Changes in the Monetary Base,Economics,$12.99,

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