Which of the following items is not included when computing M1? a. Coins in circulation.b. Currency in circulation.c. Savings accounts.d. Checking account entries.

If the Fed decides to engage in an open market operation to increase the money supply, what will it do? a. Sell Treasury bonds, bills, or notes on the bond market.b. Buy Treasury bonds, bills, or notes on the bond market.c. Increase the required reserve ratio.d. Increase the fed funds rate.

__________ plus__________ plus__________ equals. a. Total deposits, loans, required reserves, excess reserves.b. Loans, required reserves, excess reserves, total deposits.c. Required reserves, total deposits, excess reserves, loans.d. Excess reserves, loans, total deposits, required reserves.

If a bank has total deposits of $100,000 with$10,000 set aside to meet reserve requirements of the Fed, its required reserve ratio is a. $10,000.b. 10 percent.c. 0.1 percent.d. 1 percent.

Assume a simplified banking system in which all banks are subject to a uniform required reserve ratio of 30 percent and checkable deposits are the only form of money. A bank that receives a new deposit of $10,000 is able to extend new loans up to a maximum of a. $3,000.b. $7,000.c. $10,000.d. $30,000.

The Best National Bank operates with a 10 percent required reserve ratio. One day a depositor withdraws $400 from his or her checking account at the bank. As a result, the bank’s excess reserves a. fall by $400.b. fall by $360.c. fall by $40.d. rise by $400.

If an increase of $100 in excess reserves in a simplified banking system can lead to a total expansion in bank deposits of $400, the required reserve ratio must be a. 40 percent.b. 400 percent.c. 25 percent.d. 4 percent.e. 2.5 percent.

In a simplified banking system in which all banks are subject to a 20 percent required reserve ratio, a $1,000 open market purchase by the Fed would cause the money supply to a. increase by $100.b. decrease by $200.c. decrease by $5,000.d. increase by $5,000.

The cost to a member bank of borrowing from the Federal Reserve is measured by the a. reserve requirement.b. price of securities in the open market.c. discount rate.d. yield on government bonds.

What is the quantity theory of money, and what does each term in the equation represent? Explain the difference between the Keynesian and the monetarist views on how an increase in the money supply causes inflation.