1. I have $10,000 in a cookie jar that I keep under my mattress. If I deposit that money in a checking account and the required reserve ratio is 10%, the maximum possible increase in the money supply that will result from my deposit is:

A $9,000.

B $10,000.

C $11,000.

D $90,000.

E $100,000.

2. I have $10,000 in a cookie jar that I keep under my mattress. If I deposit that money in a checking account and the required reserve ratio is 10%, the actual increase in the money supply resulting from my deposit if banks hold 2% in excess reserves will be:

A $8,333.

B $8,800.

C $11,200.

D $73,333.

E $83,333.

3. Best National Bank operates with a 20% required reserve ratio. One day a depositor withdraws $500 from his or her checking account at this bank. As a result, the bank's reserves:

A. fall by $500.

B.fall by $400.

C.fall by $100.

D.rise by $100.

E.rise by $500.

4. When the legal reserve requirement is lowered:

A the money multiplier increases, and the amount of excess reserves temporarily increases in the banking system.

B the money multiplier decreases, and the amount of excess reserves temporarily increases in the banking system.

C the money multiplier decreases, and the amount of excess reserves temporarily decreases in the banking system.

D the money multiplier increases, and the amount of excess reserves temporarily decreases in the banking system.

E there is no change in either the money multiplier or the amount of excess reserves in the banking system.

Answer rating: 100% (QA)

1 E Maximum increase in money supply Increase in deposit Reserve ratio 10000 01 1000... View the full answer