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 41

Multiple Choice

Review LaterAdd Note

Review Later

The basic reason why the commercial banking system can increase its checkable deposits by a multiple of its excess reserves is that:

A) reserves lost by any particular bank will be gained by some other bank.
B) the central banks follow policies that prevent reserves from falling below the level required by law.
C) the MPC of borrowers is greater than zero but less than 1.
D) the banking system must keep reserves equal to 100 percent of its checkable-deposit liabilities.

E) A) and D)
F) B) and D)

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

When commercial banks use excess reserves to buy government securities from the public:

A) new money is created.
B) commercial bank reserves increase.
C) the money supply falls.
D) checkable deposits decline.

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

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

If you deposit a $50 bill in a commercial bank that has a 10 percent legal reserve requirement,the bank will:

Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r } \text { Reserves } & \$ 100 \\\text { Checkable Deposits } & 1,000 \\\text { Loans (to customers) } & 300 \\\text { Property } & 400 \\\text { Securities (owned) } & 300 \\\text { Stock Shares } & 100\end{array}$ Refer to the information.If Moolah Bank is legally "loaned up," the banking system's monetary multiplier must be:

If m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio,then for the banking system:

The multiple by which the commercial banking system can increase the supply of money on the basis of each dollar of excess reserves is equal to:

The multiple by which the commercial banking system can expand the supply of money is equal to the reciprocal of:

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to row 3 in the table.The number appropriate for space Y is:

Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r } \text { Reserves } & \$ 100 \\\text { Checkable Deposits } & 1,000 \\\text { Loans (to customers) } & 300 \\\text { Property } & 400 \\\text { Securities (owned) } & 300 \\\text { Stock Shares } & 100\end{array}$ Refer to the information.If Moolah Bank is legally "loaned up," the reserve requirement must be:

Leverage in the financial system:

Answer the question on the basis of the following information about a banking system: new currency deposited in the system = $40 billion;legal reserve ratio = 0.20;excess reserves prior to the currency deposit = $0. Refer to the information.The $40 billion deposit of new currency will support total checkable deposits of:

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.If the legal reserve ratio falls from 25 percent to 10 percent,excess reserves of this single bank will:

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 bank can safely expand its loans by a maximum of:

Assume that Smith deposits $600 in currency into her checking account in the XYZ Bank.Later that same day Jones negotiates a loan for $1,200 at the same bank.In what direction and by what amount has the supply of money changed?

The ABC Commercial Bank has $5,000 in excess reserves and the reserve ratio is 30 percent.This information is consistent with the bank having:

A reserve requirement of 20 percent means a bank must have $1,000 of reserves if its checkable deposits are:

A single commercial bank must meet a 25 percent reserve requirement.If the bank has no excess reserves initially and $5,000 of cash is deposited in the bank,it can increase its loans by a maximum of:

Commercial banks create money when they:

Answer the question on the basis of the following information for the Moolah Bank. ([\begin{array} { l r } \text { Reserves } & \$ 100 \\ \text { Checkable Deposits } & 1,000 \\ \text { Loans (to customers) } & 300 \\ \text { Property } & 400 \\ \text { Securities (owned) } & 300 \\ \text { Stock Shares } & 100 \end{array}\) Assume that the listed amounts constitute this bank's complete set of accounts.Moolah's:

Which one of the following is presently a major deterrent to bank panics in the United States?