Multiple Deposit Creation: A Simple Model
1) When the Fed supplies the banking system with an extra dollar of reserves, deposits increase by more than one dollar a process called
A) extra deposit creation.
B) multiple deposit creation.
C) expansionary deposit creation.
D) stimulative deposit creation.
2) When the Fed supplies the banking system with an extra dollar of reserves, deposits ________ by ________ than one dollar a process called multiple deposit creation.
A) increase; less
B) increase; more
C) decrease; less
D) decrease; more
3) If the required reserve ratio is equal to 10 percent, a single bank can increase its loans up to a maximum amount equal to
A) its excess reserves.
B) 10 times its excess reserves.
C) 10 percent of its excess reserves.
D) its total reserves.
4) In the simple deposit expansion model, if the Fed purchases $100 worth of bonds from a bank that previously had no excess reserves, the bank can now increase its loans by
A) $10.
B) $100.
C) $100 times the reciprocal of the required reserve ratio.
D) $100 times the required reserve ratio.