Reference no: EM13859042

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.