1- If the central bank buys bonds from the public*

The money supply will contract

Bank reserve ratio will change

Banks will be able to make additional loans

Demand deposits will decrease

2- Which list contains only actions that decrease the money supply?*

Lower the discount rate, raise the required reserve ratio

Lower the discount rate, lower the required reserve ratio

Raise the discount rate, raise the required reserve ratio

Raise the discount rate, lower the required reserve ratio

3- In the bank's balance sheet, assets include*

Reserves, loans and checkable deposits

Reserves, loans and bank capital

Reserves, loans and securities

Reserves, loans and borrowings

4- If the money multiplier is 8, the required reserve ratio is*

8%

16%

12.5%

20%

5- Using the money demand and money supply model, an increase in the reserve ratio by the central bank would cause the interest rate to*

Increase, then decrease

Not change

Decrease

Increase

6- If the required reserve ratio is 10% , then the required reserves are*

$ 10, 000

$ 20, 000

$ 5,000

$ 4,000

7- If the required reserve ratio is 10% and the central bank buys $5,000 of government securities from Byblos bank, then securities will decrease by ______ and the money supply will _______*

$5,000; increase by $5,000

$5,000; decrease by $5,000

$5,000; decrease by $50,000

$5,000; increase by $50,000

Table 2 Assets (millions) Liabilities (millions) Reserves 10,000$ Deposits 40,000$ Loans 20,000$ securities 10,000$ Total 40,0005 Total 40,000$ Total 40,000$