Question

20a.

The ____________ is the sum of currency and reserve deposits, the monetary _________ of the central bank

monetary base; liabilities

money stock; assets

money stock; liabilities

monetary base; assets

b.

Time deposits are ______ liquid than savings deposits and typically earn a _________ interest rate than savings deposits.

less; higher

more; higher

more; lower

less; lower

c.

If banks must hold $2 in reserves for each $10 in deposits, and the public decides to hold $3 in currency for each $10 in deposits, then the money multiplier has a value of ______.

2.6

2.0

2.5

4.0

d.

Currency held by the public is __________ of households and __________ nonbank firms.

an asset; an asset

an asset; an asset

a liability; an asset

a liability; a liability

e.

Currency in the hands of the public is __________ of households and non-bank firms, and _________ of the Fed

an asset; a liability

an asset; an asset

a liability; an asset

a liability; a liability

Answer 1

20.a.

The monetary base is the sum of currency with the public and reserve deposits of the bank which are liabilities of the central bank.

the correct option is (a)

b.

Time deposits are less liquid than saving deposits and typically earn a higher rate of interest than saving deposits as the money is locked for a longer period of time.

the correct option is (a)

c.

If bank holds $5 reserve for every $10 deposit as total reserve is currency with public and bank reserves implies it holds $50 for every $100 deposit means required reserve ratio is 0.5 and money multiplier is 1/required reserve ratio = 1/0.5= 2

the correct option is (b)

d.

Currency with the public is an asset with the household and an asset with the non bank firms.

the correct option is (a)

e.

Currency held by the public is an asset for the household and non bank firms while a liability for the central bank.

the correct option is (a)