FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 34: Money Creation

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

Answer the question on the basis of the following table for a commercial bank or thrift: $\begin{array}{c}\begin{array}{c}(1) \\\text {Legal Reserve}\\\underline{\text {Ratio (\%) }}\\10 \\20 \\25 \\30\end{array}\begin{array}{c}(2) \\\text {Checkable}\\\underline{\text {Deposits}}\\ \$ 40,000 \\40,000\\40,000\\40,000\end{array}\begin{array}{c}(3) \\\text {Actual}\\\underline{\text {Reserves}}\\\$ 10,000 \\10,000\\10,000\\10,000\end{array}\end{array}$ Refer to the table.When the legal reserve ratio is 30 percent,the monetary multiplier is:

A) 5.
B) 4.
C) 3.33.
D) 2.5.

E) A) and C)
F) B) and C)

Correct Answer

verified

Show Answer

Question 62

Multiple Choice

Review LaterAdd Note

Review Later

If actual reserves in the banking system are $40,000,excess reserves are $10,000,and checkable deposits are $240,000,then the legal reserve requirement is:

A) 10 percent.
B) 12.5 percent.
C) 20 percent.
D) 5 percent.

E) B) and C)
F) B) and D)

Correct Answer

verified

Show Answer

Question 63

Multiple Choice

Review LaterAdd Note

Suppose a commercial banking system has $100,000 of outstanding checkable deposits and actual reserves of $35,000.If the reserve ratio is 20 percent,the banking system can expand the supply of money by the maximum amount of:

Commercial bank reserves are an asset to commercial banks but a liability to the Federal Reserve Bank holding them.

Assume the Continental National Bank's balance statement is as follows: $\begin{array}{c}\begin{array}{lll}\quad\quad\quad\underline{\text { Assets}}\\\text { Reserves}\\\text { Loans}\\\text { Securities} \end{array}\begin{array}{l}\\\$ 40,000 \\25,000 \\110,000 \\\end{array}\begin{array}{lll}\quad\quad \underline{\text { Liabilities \& Net Worth }}\\\text { Checkable Deposits}\\\text { Stock Shares}\\\\\end{array}\begin{array}{lll}\\\$130,000\\45,000\\\\\end{array}\end{array}$ Assuming a legal reserve ratio of 20 percent,how much in excess reserves would this bank have after a check for $10,000 was drawn and cleared against it?

If the monetary authorities want to reduce the monetary multiplier,they should:

Suppose Balin has $100 to invest in an opportunity that returns,for every $100 invested,$120 if it goes well but only $80 if it goes poorly.If leverage allows Balin to borrow $90 for every $10 he invests,what are his rates of profit and loss,respectively,if he borrows the full amount to invest in the opportunity?

The amount of reserves that a commercial bank is required to hold is equal to:

A fractional reserve banking system:

Money is destroyed when:

Assume that a bank initially has no excess reserves.If it receives $5,000 in cash from a depositor and the bank finds that it can safely lend out $4,500,the reserve requirement must be:

Which of the following statements is correct?

Checkable deposits are a liability on a bank's balance sheet.

If a portion of the loans extended by commercial banks is taken as cash rather than as checkable deposits,the maximum money-creating potential of the commercial banking system will:

If actual reserves in the banking system are $50,000,excess reserves are $5,000,and checkable deposits are $225,000,then the monetary multiplier is:

Use the following balance sheet for the ABC National Bank in answering the question.Assume the required reserve ratio is 20 percent. $\begin{array}{c}\begin{array}{lll}\quad\quad\quad\underline{\text { Assets}}\\\text { Reserves}\\\text { Securities}\\\text { Loans}\\\text { Property} \end{array}\begin{array}{l}\\\$ 27,000 \\50,000 \\33,000 \\200,000\end{array}\begin{array}{lll}\quad\quad \underline{\text { Liabilities \& Net Worth }}\\\text { Checkable Deposits}\\\text { Stock Shares}\\\\\\\end{array}\begin{array}{lll}\\\$1,100\\200,000\\\\\\\end{array}\end{array}$ Refer to the data.This commercial bank has excess reserves of:

In prosperous times,commercial banks are likely to hold very small amounts of excess reserves because:

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to row 1 in the table.The number appropriate for space W is:

Use the following balance sheet for the ABC National Bank in answering the question.Assume the required reserve ratio is 20 percent. $\begin{array}{c}\begin{array}{lll}\quad\quad\quad\underline{\text { Assets}}\\\text { Reserves}\\\text { Securities}\\\text { Loans}\\\text { Property} \end{array}\begin{array}{l}\\\$ 27,000 \\50,000 \\33,000 \\200,000\end{array}\begin{array}{lll}\quad\quad \underline{\text { Liabilities \& Net Worth }}\\\text { Checkable Deposits}\\\text { Stock Shares}\\\\\\\end{array}\begin{array}{lll}\\\$1,100\\200,000\\\\\\\end{array}\end{array}$ Refer to the data.Assuming the bank loans out all of its remaining excess reserves as a checkable deposit,and has a check cleared against it for that amount,its reserves and checkable deposits will now be:

The market for immediately available reserve balances at the Federal Reserve is known as the: