Trevor goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base? Select one: O a. The monetary base will decline as bank reserves fall. O b. The monetary base will increase with the increase in currency in circulation. O c. The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves. O d. The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves.

Trevor goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base? Select one: O a. The monetary base will decline as bank reserves fall. O b. The monetary base will increase with the increase in currency in circulation. O c. The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves. O d. The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the required reserve ratio is 10% and a bank receives a $10 million deposit into a checking account. By how much will deposits change in the banking system? (assume that the banking system currently has no excess reserves) Select one: $100 million. O $90 million. $10 million. O $110 million. Clear my choice
Economics Which set of actions implies that the government will raise the money supply, as measured by M1 or M2, by $100? The Fed raises the reserve requirement at small banks from 5 percent to 10 percent. Outstanding bank loans remain at $100. O The Fed reduces the discount window rate that it lends at from 5 percent to 4 percent, and discount window loans remain unchanged at $100. O The Fed shuts down a bank that has deposits and assets both exactly equal to $100 (and bank equity equal to zero). One branch of the government sells a treasury bill for $100 in order to pay for vaccine supplies, and the Fed purchases that $100 treasury bill with $100 in bank reserves. The Fed sells a $100 treasury bill to a private bank for $100 in reserves.
Question 2 In countries with very high rates of inflation (hyperinflation), it is usually the case that O the growth rate of the money supply is greater than the inflation rate. O the growth rate of the velocity of circulation is negative. O the growth rate of the money supply is less than the growth rate of the inflation rate. O the growth rate of the money supply is equal to the inflation rate.
Which of the following is NOT a function of money? O a. A unit of account O b. A store of value O c. An interest-earning asset O d. A medium of exchange
Banks create money by O a. buying U.S. government securities with cash. O b. printing money up to their required reserve limit. O c. creating deposits without limit. O d. making loans and creating deposits, a process that is limited by the size of banks' excess reserves. O e. printing dollar bills without limit.
If banks increase their holdings of excess reserves O a. the money multiplier increases and the money supply decreases. O b. the money multiplier decreases and the money supply increases. c. the money multiplier and the money supply decrease. O d. the money multiplier and the money supply increase.
Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: O the money supply by the whole banking system can increase by $1,000. O the money supply by the whole banking system can increase by $4,000. the money supply by the whole banking system can increase by $8,000. O the money supply by the whole banking system can increase by $5,000.
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Suppose the required reserve ratio increased from 5 percent to 10 percent, and suppose banks kept no excess reserves. Ceteris paribus, it follows that the "money" (or "deposit") multiplier would: Select one: O a. decrease from 20 to 10. O b. increase from 5 to 10. O c. decrease from 10 to 20. O d. decrease from 1/5 to1/10.
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Cash: $129.25 billion Checking deposits: $207.4 billion Saving accounts: $273.5 billion Small denomination time deposits: $27.3 billion Bank reserves held at the Fed: $43.0 billion Suppose that in a certain economy, the above are the only forms of money. How big is the monetary base (MB)? O a. $508.20 billion O b. $364.15 billion O c. $610.15 billion O d. $316.50 billion O e. $172.25 billion O f. $653.15 billion
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