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# tb16 - Chapter 16 Determinants of the Money Supply T...

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Chapter 16 Determinants of the Money Supply T Multiple Choice 1) Money supply models tend to focus on the monetary base rather than on reserves since (a) Fed actions have no effect on reserves but have a predictable effect on the monetary base. (b) Fed actions in general have little effect on reserves but have a predictable effect on the monetary base. (c) Fed actions have a more predictable effect on the monetary base. (d) none of the above. Answer: C Question Status: Previous Edition 2) Models describing the determination of the money supply and the Fed’s role in this process normally focus on _____ rather than _____, since Fed actions have a more predictable effect on the former. (a) reserves; the monetary base (b) reserves; high-powered money (c) the monetary base; high-powered money (d) the monetary base; reserves Answer: D Question Status: Previous Edition 3) The Fed can exert more precise control over _____ than it can over _____. (a) high-powered money; reserves (b) high-powered money; the monetary base (c) the monetary base; high-powered money (d) reserves; high-powered money Answer: A Question Status: Previous Edition 4) The ratio that relates the change in the money supply to a given change in the monetary base is called the (a) money multiplier. (b) required reserve ratio. (c) deposit ratio. (d) discount rate. Answer: A Question Status: Previous Edition

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556 Frederic S. Mishkin • Economics of Money, Banking, and Financial Markets, Seventh Edition 5) The formula linking the money supply to the monetary base is (a) M = m / MB. (b) M = m × MB. (c) m = M × MB. (d) MB = M × m. (e) M = m + MB. Answer: B Question Status: New 6) The variable that reflects the effect on the money supply of changes in factors other than the monetary base is the (a) currency-checkable deposits ratio. (b) required reserve ratio. (c) money multiplier. (d) nonborrowed base. Answer: C Question Status: Previous Edition 7) The equation linking the monetary base to the levels of checkable deposits and currency is (a) MB = R + C. (b) MB = (r × D) + ER. (c) MB = (r × D) + ER + C. (d) both (a) and (b) are correct. (e) both (a) and (c) are correct. Answer: E Question Status: New 8) The equation linking the monetary base to the levels of checkable deposits and currency is (a) MB = (r × D) + R + C. (b) MB = (r + D) + ER + C. (c) MB = (r / D) + ER + C. (d) MB = (r – D) + ER – C. (e) MB = (r × D) – ER – C. Answer: A Question Status: New 9) An increase in the monetary base that goes into _____ is not multiplied, while an increase that goes into _____ is multiplied. (a) deposits; currency (b) excess reserves; currency (c) currency; excess reserves (d) currency; deposits (e) deposits; excess reserves Answer: D Question Status: New
Chapter 16 Determinants of the Money Supply 557 10) An increase in the monetary base that goes into currency is _____, while an increase that goes into deposits is _____. (a) multiplied; multiplied (b) not multiplied; multiplied (c) multiplied; not multiplied (d) not multiplied; not multiplied (e) added; subtracted Answer: B Question Status: New 11) During the Christmas holiday season, depositors typically withdraw more currency from their accounts. This implies that (a) the money multiplier falls during the Christmas season.

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tb16 - Chapter 16 Determinants of the Money Supply T...

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