1. The money multiplier equals 1/R, where R represents the quantity of reserves in the economy.
1/R, where R represents the reserve ratio for all banks in the economy.
1/(1+R), where R represents the quantity of reserves in the economy.
1/(1+R), where R represents the reserve ratio for all banks in the economy.
2. If the money multiplier is 2 and the Fed buys $50,000 worth of bonds, what happens to the money supply?
it increases by $100,000
it increases by $150,000
it decreases by $100,000
it decreases by $150,000
3. A bank has $10,000 in deposits and $8,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is
2 percent.
12.5 percent.
20 percent.
80 percent.
4. What does the Fed auction at the Term-Auction Facility?
government bonds of a quantity it sets
government bonds with the quantity determined at the auction
loans of a quantity it sets
loans with the quantity determined at the auction
5. The manager of the bank where you work tells you that your bank has $5 million in excess reserves. She also tells you that the bank has $300 million in deposits and $255 million dollars in loans. Given this information you find that the reserve requirement must be
50/255.
40/255.
50/300.
40/300.
6. If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by
$64 of new reserves.
$448 of new reserves.
$700 of new reserves.
$800 of new reserves.