Question 1

Which of the following assets yields a 0 percent return?

Accepted Answer

A)  U.S. Treasury Bills 
B)  Excess reserves 
C)  Deposits with correspondent banks 
D)  Municipal bonds 
A)  U.S. Treasury Bills 
B)  Excess reserves 
C)  Deposits with correspondent banks 
D)  Municipal bonds

Question 2

When a bank receives a check drawn on an account from another commercial bank, the bank gains

Accepted Answer

A)  capital equal to the amount of the check. 
B)  capital equal to the required reserve ratio times the amount of the check. 
C)  reserves equal to the amount of the check. 
D)  reserves equal to the required reserve ratio times the amount of the check. 
A)  capital equal to the amount of the check. 
B)  capital equal to the required reserve ratio times the amount of the check. 
C)  reserves equal to the amount of the check. 
D)  reserves equal to the required reserve ratio times the amount of the check.

Question 3

The demand deposit multiplier is equal to the

Accepted Answer

A)  reciprocal of the reserve requirement ratio. 
B)  reciprocal of the discount rate. 
C)  inverse of the reserve requirement ratio. 
D)  inverse of the discount rate. 
A)  reciprocal of the reserve requirement ratio. 
B)  reciprocal of the discount rate. 
C)  inverse of the reserve requirement ratio. 
D)  inverse of the discount rate.

Question 4

If a bank buys securities, its

Accepted Answer

A)  net worth increases. 
B)  net worth decreases. 
C)  reserves increase. 
D)  reserves decrease. 
A)  net worth increases. 
B)  net worth decreases. 
C)  reserves increase. 
D)  reserves decrease.

Question 5

Assume that the required reserve ratio is 10 percent. A bank has deposits of $1,000,000 and cash of $500,000 in the Fed. The bank has demand deposits equal to $1,500,000. Given this information, the bank has excess reserves of

Accepted Answer

A)  $850,000. 
B)  $350,000. 
C)  $1,350,000. 
D)  None of the above. 
A)  $850,000. 
B)  $350,000. 
C)  $1,350,000. 
D)  None of the above.

Question 6

If the required reserve ratio is .10, the demand deposit expansion multiplier is

Accepted Answer

A)  .1. 
B)  4. 
C)  5. 
D)  10. 
A)  .1. 
B)  4. 
C)  5. 
D)  10.

Question 7

Banks prefer __________ hold excess reserves because __________.

Accepted Answer

A)  not to; excess reserves earn no interest 
B)  not to; banks are not required to hold them 
C)  to; excess reserves earn interest 
D)  to; banks need them to prevent runs 
A)  not to; excess reserves earn no interest 
B)  not to; banks are not required to hold them 
C)  to; excess reserves earn interest 
D)  to; banks need them to prevent runs

Which of the following assets yields a 0 percent return?

When a bank receives a check drawn on an account from another commercial bank, the bank gains

The demand deposit multiplier is equal to the

If a bank buys securities, its

Assume that the required reserve ratio is 10 percent. A bank has deposits of $1,000,000 and cash of $500,000 in the Fed. The bank has demand deposits equal to $1,500,000. Given this information, the bank has excess reserves of

If the required reserve ratio is .10, the demand deposit expansion multiplier is

Banks prefer hold excess reserves because .

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Financial Instruments, Markets, and Institutions

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Structure and Performance of Securities Markets

The Pricing of Risky Financial Assets

Money and Capital Markets

Demystifying Derivatives

Understanding Foreign Exchange

The Nature of Financial Intermediation

Depository Financial Institutions

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Financial System Design

Who's in Charge Here?

The Instruments of Central Bankin

Understanding Movements in Bank Reserves

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

Filters

Exam 18: Bank Reserves and the Money Supply

Which of the following assets yields a 0 percent return?

When a bank receives a check drawn on an account from another commercial bank, the bank gains

The demand deposit multiplier is equal to the

If a bank buys securities, its

Assume that the required reserve ratio is 10 percent. A bank has deposits of $1,000,000 and cash of $500,000 in the Fed. The bank has demand deposits equal to $1,500,000. Given this information, the bank has excess reserves of

If the required reserve ratio is .10, the demand deposit expansion multiplier is

Banks prefer __________ hold excess reserves because __________.

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Financial Instruments, Markets, and Institutions

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Structure and Performance of Securities Markets

The Pricing of Risky Financial Assets

Money and Capital Markets

Demystifying Derivatives

Understanding Foreign Exchange

The Nature of Financial Intermediation

Depository Financial Institutions

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Financial System Design

Who's in Charge Here?

The Instruments of Central Bankin

Understanding Movements in Bank Reserves

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

Filters

Banks prefer hold excess reserves because .