Answer the following statements true (T) or false (F)
1. When bank loans are repaid and the banks hold on to the funds as additional reserves, then the banking system's ability to "create" money decreases.
2. The monetary multiplier can also be called the spending multiplier.
3. The maximum deposit creation that can be made in the banking system is equal to the excess reserves divided by the required reserve ratio.
4. If the banking system has $20 billion in excess reserves and if the reserve ratio is 10 percent, the system can increase its loans by a maximum of $22 billion.
5. If a commercial banking system has $200,000 in checkable deposits and actual reserves of $70,000, then with a reserve ratio of 20 percent the banking system can expand the supply of money by a maximum of $180,000.
1. True
2. False
3. True
4. False
5. False
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The Fed's two main monetary policy targets are
A) the interest rate and real GDP. B) the money supply and the interest rate. C) the money supply and the inflation rate. D) the inflation rate and real GDP.
Which of the following is not an example of derived demand?
a. More people want to plant gardens in the spring; therefore, demand for hoes and shovels increases then. b. Strong ticket sales for a concert cause the producers to schedule an extra show and demand more ushers. c. Increased use of robots leads to a decrease in demand for labor. d. The development of alternative fuels made from corn leads to an increase in demand for corn. e. Increasing demand for music leads to the construction of more recording studios.