True or False:
1. The Fed controls the supply of money, even though privately owned commercial banks actually create and destroy money by making loans.
2. Open market purchases or sales of bonds by the Fed have an ultimate impact on the money supply that is several times the amount of the purchase or sale.
3. If the Fed buys bonds in an open market operation, and the seller deposits the payment in her bank account, the money supply will increase and lead to an increase in the bank's reserves.
4. With a 10 percent required reserve ratio, a $10,000 cash deposit in a bank would result in an increase in the bank's excess reserves of $1,000.
5. With a 10 percent required reserve ratio, a $1,000 bond purchase by the Fed directly creates $1,000 in money in the form of bank deposits, and indirectly permits up to $9,000 in additional money to be created through the multiple expansion in bank deposits.
6. The Fed selling government bonds will tend to cause a multiple expansion of bank deposits.
7. Generally, in a growing economy, where the real value of goods and services is increasing over time, an increase in the supply of money is needed to maintain stable prices.
8. Changes in required reserve ratios are such a potent monetary policy tool that they are frequently used.