The lectures and textbook described the process of creation of the money supply in an economy in detail. The following several questions concern the structure of this process.

According to the lectures and the textbook, the most important participant in the money supply process is the banking system.

True

False

The monetary base can be expressed as the sum of

a. currency outside the central bank and banks' reserve deposits

b. currency outside banks and bank reserves

c. non-borrowed monetary base and discount loans

d. all above expressions are true

Besides the central bank, the government may also deliberately influence the money supply by actively manipulating its deposit in the central bank.

True

False

Suppose a person cashes her paycheck and holds all the funds in the form of currency. Other things equal, as a result bank reserves will _______________ and the monetary base will ________________.

a. remain unchanged; increase

b. decrease; increase

c. decrease; remain unchanged

d. increase; decrease

Answer rating: 100% (QA)

Solution True The most important participant in the money supply process is ... View the full answer