The more people decide to hold currency, :smaller the actual money multiplier .greater control the Fed has over the money supply .larger the actual money multiplier .larger the money supply

Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $100. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement Simple Money Multiplier Money Supply (Percent) (Dollars) 25           10             A lower reserve requirement is associated with a    money supply.   Suppose the Federal Reserve wants to increase the money supply by $100. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to       worth of U.S. government bonds.   Now, suppose that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic conditions.…

The Fed is both literally and figuratively a money machine. Describe how banks create money.

Figure 31-3 On the following graph, MS represents the money supply and MD represents money demand. VALUE OF MONEY 0.6 0.45 5000 MS, MS 9000 QUANTITY OF MONEY MD Refer to Figure 31-3. Which of the following events could explain a shift of the money-supply curve from MS₁ to MS2? An increase in the value of money A decrease in the price level An open-market purchase of bonds by the Federal Reserve The Federal Reserve sells bonds

An increase in nominal GDP will Multiple Choice   increase the transactions demand and the total demand for money.   decrease the transactions demand and the total demand for money.   increase the transactions demand for money but decrease the total demand for money.   decrease the transactions demand for money but increase the total demand for money.

If the money multiplier is 5 and the Fed sells $1 million worth of bonds, what happens to the money supply? Group of answer choices It decreases by $10 million. It increases by $10 million. It decreases by $5 million. It increases by $5 million.

f the Fed wants to raise interest rates, then it can use its open market operations to: Group of answer choices decrease the money supply. increase the money supply. increase money demand. decrease money demand.

If the money supply is $60 and nominal GDP is $360, then Group of answer choices A) the velocity of money must be 300. B) the velocity of money must be 4.2. C) the velocity of money must be 3. D) the velocity of money must be 60. E) the velocity of money must be 6.

In countries with extremely high inflation, increases in the money supply:     A) are quickly translated into changes in the inflation rate.   B) do not affect the price level.   C) will decrease real GDP.   D) will increase real GDP.

The graph shows the demand curve for bank reserves, RD. The current quantity of reserves supplied is $20 billion. Draw a point on the curve that shows the federal funds rate when the quantity of reserves supplied is $20 billion. Label it 1. The Fed wants to set the federal funds rate at 4 percent a year. Draw a supply of reserves curve that achieves the target. Label it. Draw a point to show the new equilibrium federal funds rate. Label it 2. To change the federal funds rate from 5 percent a year to 4 percent a year, the Fed conducts an open market of securities. 8- 7- 6- 5- 4- 3- 2- 1- to 0 Federal funds rate (percent per year) RD Q Q 20 10 30 40 50 60 70 80 Reserves on deposit at the Fed (billions of dollars) >>> Draw only the objects specified in the question. ✔