Question

Ml equals currency + demand deposits + A)nothing else B)othere checkable deposits. C)traveler's checks + other checkable deposits. D)traveler's checks + other checkable deposits -+ savings deposits 2. If you deposit $100 of currency into a demand deposit at a bank, this action by itself A)does not change the money supply. B)increases the money supply. C)decreases the money supply. D)has an indeterminate effect on the money supply. 3. 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 A)50/255 B)40/255 C)50/300 D) 40/300 4. When a bank loans out $1000, the money supply A)does not change B) 5. decreases. ncrėases. D)may do any of the above 6. Which ofthe following is not an asset for a bank? A)Excess reserves B)Holding of U.S. government securities, C)Checking account balances held by depositors. D) Mortgage loans made by the bank. A deposit of $1,000 will do which of the following to the money supply? A) It will increase the money supply if banks loan out a proportion of the $1,000. B)It will decrease the money supply if banks do not loan out any of the $1,000. C) The money supply will not change regardless of how much of the $1,000 is loaned out. D)None of the above will happen. 7.

Answer 1

2. C
(M1 = C + DD + travellers' checks + other checkable deposits)

3. A
(This action by itself does not change the money supply.)

4. D
(Reserve requirement = 1- [(255+5)/300] = 1 - (260/300) = (300-260)/300 = 40/300)

5. D
(Money supply can increase, decrease, or may not change)

6. C
(Checking account balances is not an asset held by bank.)

7. D
(None of the above will happen.)