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In the simple model of multiple deposit creation in which banks do not hold excess reserves,
the increase in chequable deposits equals the product of the change in excess reserves and the
____.
A) reciprocal of the excess reserve ratio
B) simple deposit multiplier
C) reciprocal of the simple deposit multiplier
D) bank rate
Answer: B
Diff: 1 Type: MC Page Ref: 388
Skill: Recall
Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
central bank can control the level of deposits by setting the level of reserves
The simple deposit multiplier can be expressed as the ratio of the ____.
A) change in reserves in the banking system divided by the change in deposits
B) change in deposits divided by the change in reserves in the banking system
C) desired reserve ratio divided by the change in reserves in the banking system
D) change in deposits divided by the desired reserve ratio
Answer: A
Diff: 2 Type: MC Page Ref: 388
Skill: Recall
Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
central bank can control the level of deposits by setting the level of reserves
If reserves in the banking system increase by $100, then chequable deposits will increase by
$1000 in the simple model of deposit creation when the desired reserve ratio is ____.
A) 0.01
B) 0.10
C) 0.05
D) 0.20
Answer: B
Diff: 1 Type: MC Page Ref: 388
Skill: Applied
Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
central bank can control the level of deposits by setting the level of reserves
If reserves in the banking system increase by $100, then chequable deposits will increase by
$500 in the simple model of deposit creation when the desired reserve ratio is ____.
A) 0.01
B) 0.10
C) 0.05
D) 0.20
Answer: D
Diff: 1 Type: MC Page Ref: 388
Skill: Applied
Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
central bank can control the level of deposits by setting the level of reserves