Home > Money, Banking and Financial Markets > Quizzes > Money, Banking, and Financial Markets Practice Test: The Money Supply Process
Money, Banking, and Financial Markets Practice Test: The Money Supply Process
Fast practice, instant feedback. Timer auto-submits when time’s up.
Avg score: 20% • Most missed: “In the model of the money supply process, the Federal Reserveʹs role in influenc…”
The money supply process is the mechanism that determines the level of money supply. It involves: Clearing checks, Issuing new currency, Withdrawing damaged currency from circulation, and Managing and making discount loans to banks.  The money supply process includes four items: Currency in circulation, Reserves, Securities, and Loans to banks.  The formula for money supply is MS = (MB x MM). MB, or monetary base, is the amount of money in circulation or available to be circulated. MM is money multiplier, which is calculated by dividing 1 by the required reserve set by the Federal... Show more
Money, Banking, and Financial Markets Practice Test: The Money Supply Process
Time left 00:00
25 Questions

1. If reserves in the banking system increase by $100, then checkable deposits will increase by $1000 in the simple model of deposit creation when the required reserve ratio is
2. If reserves in the banking system increase by $100, then checkable deposits will increase by$2,000 in the simple model of deposit creation when the required reserve ratio is
3. Total reserves minus bank deposits with the Fed equals
4. An increase in ________ leads to an equal ________ in the monetary base in the long run.
5. The monetary liabilities of the Federal Reserve include
6. Total Reserves minus vault cash equals
7. When an individual sells a $100 bond to the Fed, she may either deposit the check she receives or cash it for currency. In both cases
8. If the required reserve ratio is 20 percent, the simple deposit multiplier is
9. An increase in the monetary base that goes into currency is ________, while an increase that goes into deposits is ________.
10. The total amount of reserves in the banking system is equal to the ________ required reserves and excess reserves.
11. A bank has excess reserves of $4,000 and demand deposit liabilities of $100,000 when the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, the bankʹs excess reserves will be
12. When the Fed supplies the banking system with an extra dollar of reserves, deposits ________ by ________ than one dollara process called multiple deposit creation.
13. Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and one million dollars in required reserves. Given this information, we can say First National Bank faces a required reserve ratio of ________ percent.
14. Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and one million dollars in required reserves. Given this information, we can say First National Bank has ________ million dollars in excess reserves.
15. The effect of an open market purchase on reserves differs depending on how the seller of the bonds keeps the proceeds. If the proceeds are kept in currency, the open market purchase________ reserves; if the proceeds are kept as deposits, the open market purchase ________ reserves.
16. When the Federal Reserve calls in a discount loan from a bank, the monetary base ________ and reserves ________.
17. If reserves in the banking system increase by $100, then checkable deposits will increase by $100 in the simple model of deposit creation when the required reserve ratio is
18. In the simple deposit expansion model, if the banking system has excess reserves of $75, and the required reserve ratio is 20%, the potential expansion of checkable deposits is
19. If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000, and if the reserve requirement is 15 percent, then the bank has actual reserves of
20. When the Federal Reserve purchases a government bond from a bank, reserves in the banking system ________ and the monetary base ________, everything else held constant.
21. The variable that reflects the effect on the money supply of changes in factors other than the monetary base is the
22. Suppose that from a new checkable deposit, First National Bank holds eight million dollars on deposit with the Federal Reserve, one million dollars in required reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has________ million dollars in vault cash.
23. In the model of the money supply process, the depositorʹs role in influencing the money supply is represented by
24. Purchases and sales of government securities by the Federal Reserve are called
25. In the simple deposit expansion model, a decline in checkable deposits of $500 when the required reserve ratio is equal to 20 percent implies that the Fed

⚡ Recently practiced quizzes in this topic
Live quiz activity
Money, Banking, and Financial Markets Practice Test: Transmission Mechanisms of Monetary Policy Money, Banking, and Financial Markets Practice Test: The Basics of Money Money, Banking, and Financial Markets Practice Test: Financial Regulation Money, Banking, and Financial Markets Practice Test: Monetary Policy Money, Banking, and Financial Markets Practice Test: How Interest Rates Behave Money, Banking, and Financial Markets Practice Test: The Basics of Interest Rates Money, Banking, and Financial Markets Practice Test: Risk and Term Structure of Interest Rates Money, Banking, and Financial Markets Practice Test: The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis Money, Banking, and Financial Markets Practice Test: Financial Crises and the Subprime Meltdown Money, Banking, and Financial Markets Practice Test: Tools for Monetary Policy (U.S.)
 
❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

🌈  Our mission is to help improve your scores in any subject and exam withonline quizzes, practice tests, study guides, & advice for students. Since 2018.
About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | What Should We Know?
Privacy | Terms |
Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.