2) When the Fed supplies the banking system with an extra dollar of reserves, deposits ________ by ________ than one dollar—a process called multiple deposit creation.A) increase; lessB) increase; moreC) decrease; lessD) decrease; moreAnswer: BAACSB: Reflective Thinking3) If the required reserve ratio is equal to 10 percent, a single bank can increase its loans up to a maximum amount equal toA) its excess reserves.B) 10 times its excess reserves.C) 10 percent of its excess reserves.D) its total reserves.Answer: AAACSB: Analytical Thinking4) In the simple deposit expansion model, if the Fed purchases $100 worth of bonds from a bank that previously had no excess reserves, the bank can now increase its loans byA) $10.B) $100.C) $100 times the reciprocal of the required reserve ratio.D) $100 times the required reserve ratio.Answer: BAACSB: Analytical Thinking5) In the simple deposit expansion model, if the Fed purchases $100 worth of bonds from a bank that previously had no excess reserves, deposits in the banking system can potentially increase byA) $10.B) $100.C) $100 times the reciprocal of the required reserve ratio.D) $100 times the required reserve ratio.Answer: CAACSB: Analytical Thinking6) In the simple deposit expansion model, if the Fed extends a $100 discount loan to a bank that previously had no excess reserves, the bank can now increase its loans byA) $10.B) $100.C) $100 times the reciprocal of the required reserve ratio.D) $100 times the required reserve ratio.Answer: BAACSB: Analytical Thinking 7) In the simple deposit expansion model, if the Fed extends a $100 discount loan to a bank that previously had no excess reserves, deposits in the banking system can potentially increase byA) $10.B) $100.C) $100 times the reciprocal of the required reserve ratio.D) $100 times the required reserve ratio.Answer: CAACSB: Analytical Thinking8) In the simple model of multiple deposit creation in which banks do not hold excess reserves, the increase in checkable deposits equals the product of the change in reserves and theA) reciprocal of the excess reserve ratio.B) simple deposit expansion multiplier.C) reciprocal of the simple deposit multiplier.D) discount rate.Answer: BAACSB: Analytical Thinking9) The simple deposit multiplier can be expressed as the ratio of theA) 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) required reserve ratio divided by the change in reserves in the banking system.D) change in deposits divided by the required reserve ratio.Answer: BAACSB: Analytical Thinking10) 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 isA) 0.01.B) 0.10.C) 0.05.D) 0.20.Answer: BAACSB: Analytical Thinking11) If reserves in the banking system increase by $100, then checkable deposits will increase by $500 in the simple model of deposit creation when the required reserve ratio isA) 0.01.B) 0.10.C) 0.05.D) 0.20Answer: DAACSB: Analytical Thinking 12) If the required reserve ratio is 10 percent, the simple deposit multiplier isA) 5.0.B) 2.5.C) 100.0.D) 10.0Answer: DAACSB: Analytical Thinking13) If the required reserve ratio is 15 percent, the simple deposit multiplier is A) 15.0.B) 1.5.C) 6.67.D) 3.33.Answer: CAACSB: Analytical Thinking14) If the required reserve ratio is 20 percent, the simple deposit multiplier isA) 5.0.B) 2.5.C) 4.0.D) 10.0.Answer: AAACSB: Analytical Thinking15) If the required reserve ratio is 25 percent, the simple deposit multiplier isA) 5.0.B) 2.5.C) 4.0.D) 10.0.Answer: CAACSB: Analytical Thinking16) A simple deposit multiplier equal to one implies a required reserve ratio equal toA) 100 percent.B) 50 percent.C) 25 percent.D) 0 percent.Answer: AAACSB: Analytical Thinking17) A simple deposit multiplier equal to two implies a required reserve ratio equal toA) 100 percent.B) 50 percent.C) 25 percent.D) 0 percent.Answer: BAACSB: Analytical Thinking