Chapter 15: Q.7 (page 410)
“The Fed can perfectly control the amount of reserves in the system.” Is this statement true, false, or uncertain? Explain.
False. Fed ultimately can't control the level of reserves in the system
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“The money multiplier is necessarily greater than ” Is this statement true, false, or uncertain? Explain your answer
Using T-accounts, show what happens to checkable deposits in the banking system when the Fed lends million to the First National Bank.
In October , the Federal Reserve began paying interest on the amount of excess reserves held by banks. How, if at all, might this affect the multiplier process and the money supply?
If the Fed lends five banks a total ofmillion but depositors withdraw million and hold it as currency, what happens to reserves and the monetary base? Use T-accounts to explain your answer.
The First National Bank receives an extra $100 of reserves but decides not to lend out any of these reserves. How much deposit creation takes place for the entire banking system?
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