Question 1

If people never withdraw cash from banks and there are no required reserves,how much money can the banking system potentially create for a given amount of new deposits?

Accepted Answer

A) None. 
B) The same amount as the new deposits. 
C) The amount of new deposits multiplied by the reserve ratio. 
D) An infinite amount of money. 
A) None. 
B) The same amount as the new deposits. 
C) The amount of new deposits multiplied by the reserve ratio. 
D) An infinite amount of money.

Question 2

Suppose a bank has $200,000 in deposits,a required reserve ratio of 15 percent,and total reserves of $100,000.Then it has excess reserves of

Accepted Answer

A) $70,000. 
B) $30,000. 
C) Negative $100,000. 
D) $200,000. 
A) $70,000. 
B) $30,000. 
C) Negative $100,000. 
D) $200,000.

Question 3

Initially a bank has a required reserve ratio of 10 percent and no excess reserves.If $1,000 is deposited into the bank,then,ceteris paribus,

Accepted Answer

A) This bank can increase its loans by $900. 
B) This bank can increase its loans by $1,000. 
C) Total reserves will increase by $900. 
D) Required reserves will increase by $1,000. 
A) This bank can increase its loans by $900. 
B) This bank can increase its loans by $1,000. 
C) Total reserves will increase by $900. 
D) Required reserves will increase by $1,000.

Question 4

A single bank with $10,000 of reserves and a reserve ratio of 25 percent could support total transactions account balances of at most

Accepted Answer

A) $10,000. 
B) $5,000. 
C) $40,000. 
D) $25,000. 
A) $10,000. 
B) $5,000. 
C) $40,000. 
D) $25,000.

Question 5

If total reserves for a bank are $25,000,excess reserves are $5,000,and demand deposits are $100,000,the money multiplier must be

Accepted Answer

A) 20. 
B) 25. 
C) 10. 
D) 5. 
A) 20. 
B) 25. 
C) 10. 
D) 5.

Question 6

Which of the following is not considered to be a private depository institution?

Accepted Answer

A) The Federal Reserve. 
B) Mutual savings banks. 
C) Savings and loan associations. 
D) Commercial banks. 
A) The Federal Reserve. 
B) Mutual savings banks. 
C) Savings and loan associations. 
D) Commercial banks.

Question 7

The majority of the basic money supply (M1)in the United States is in the form of

Accepted Answer

A) Savings accounts and currency in circulation. 
B) Certificates of deposit and transactions accounts. 
C) Transactions accounts and currency in circulation. 
D) Gold and traveler's checks. 
A) Savings accounts and currency in circulation. 
B) Certificates of deposit and transactions accounts. 
C) Transactions accounts and currency in circulation. 
D) Gold and traveler's checks.

Question 8

When the reserve requirement changes,which of the following will change for an individual bank?

Accepted Answer

A) Transactions account balances and lending capacity. 
B) Transactions account balances,total reserves,and excess reserves. 
C) Total reserves,required reserves,and excess reserves. 
D) Required reserves,excess reserves,and lending capacity. 
A) Transactions account balances and lending capacity. 
B) Transactions account balances,total reserves,and excess reserves. 
C) Total reserves,required reserves,and excess reserves. 
D) Required reserves,excess reserves,and lending capacity.

Question 9

If excess reserves are $30,000,demand deposits are $100,000,and the required reserve ratio is 15 percent,then total reserves are

Accepted Answer

A) $45,000. 
B) $15,000. 
C) $30,000. 
D) $130,000. 
A) $45,000. 
B) $15,000. 
C) $30,000. 
D) $130,000.

Question 10

The ratio of a bank's total reserves to its total transactions deposits is known as the

Accepted Answer

A) Required reserves. 
B) Reserve ratio. 
C) Excess reserves. 
D) Deposit ratio. 
A) Required reserves. 
B) Reserve ratio. 
C) Excess reserves. 
D) Deposit ratio.

Question 11

Suppose a bank has $100,000 in deposits,a required reserve ratio of 20 percent,and total reserves of $20,000.Then this bank can make new loans in the amount of

Accepted Answer

A) $100,000. 
B) $20,000. 
C) $40,000. 
D) $0. 
A) $100,000. 
B) $20,000. 
C) $40,000. 
D) $0.

Question 12

Transactions accounts allow for direct payment to a third party.

Accepted Answer

A) True 
 B)False

Question 13

Suppose a banking system has $200 million in deposits,a required reserve ratio of 10 percent,and total bank reserves of $35 million.Then the potential increase in deposit creation for the whole banking system is equal to

Accepted Answer

A) $3 million. 
B) $15 million. 
C) $150 million. 
D) $0. 
A) $3 million. 
B) $15 million. 
C) $150 million. 
D) $0.

Question 14

If bank customers decide as a group to pay off their loans and to not take out any new loans,ceteris paribus,

Accepted Answer

A) Excess reserves will decrease. 
B) The money multiplier will decrease. 
C) The money supply will increase. 
D) The money supply will decrease. 
A) Excess reserves will decrease. 
B) The money multiplier will decrease. 
C) The money supply will increase. 
D) The money supply will decrease.

Question 15

Table 13.1 XYZ Bank Balance Sheet
  Refer to Table 13.1.With a required reserve ratio of 12 percent,XYZ Bank would have excess reserves of

Accepted Answer

A) $100,000. 
B) $48,000. 
C) $52,000. 
D) $12,000. 
A) $100,000. 
B) $48,000. 
C) $52,000. 
D) $12,000.

Question 16

What are the constraints on deposit creation for the banking system?

Accepted Answer

Deposit creation is contingent upon seve

Question 17

Table 13.2 ABC Bank Balance Sheet
  Refer to Table 13.2.If ABC Bank has a required reserve ratio of 15 percent,it can legally make a onetime maximum loan of

Accepted Answer

A) $30,000. 
B) $40,000. 
C) $50,000. 
D) $80,000. 
A) $30,000. 
B) $40,000. 
C) $50,000. 
D) $80,000.

Question 18

Which of the following is not true about M1?

Accepted Answer

A) It includes the most liquid forms of money. 
B) It is the narrowest definition of the money supply. 
C) Savings accounts makes up approximately one-third of it. 
D) Currency in circulation makes up approximately half of it. 
A) It includes the most liquid forms of money. 
B) It is the narrowest definition of the money supply. 
C) Savings accounts makes up approximately one-third of it. 
D) Currency in circulation makes up approximately half of it.

Question 19

Which of the following is not included in M1?

Accepted Answer

A) Credit union share drafts. 
B) Transactions account balances at mutual savings banks. 
C) Currency in circulation outside of commercial banks. 
D) Savings account balances at a federal savings bank. 
A) Credit union share drafts. 
B) Transactions account balances at mutual savings banks. 
C) Currency in circulation outside of commercial banks. 
D) Savings account balances at a federal savings bank.

Question 20

Which of the following gave the U.S.federal government permanent authority to issue money?

Accepted Answer

A) The Constitution of the United States in 1779. 
B) The National Banking Act of 1863. 
C) The creation of the FDIC and FSLIC in 1933. 
D) The Monetary Control Act of 1980. 
A) The Constitution of the United States in 1779. 
B) The National Banking Act of 1863. 
C) The creation of the FDIC and FSLIC in 1933. 
D) The Monetary Control Act of 1980.

Exam 13: Money and Banks

If people never withdraw cash from banks and there are no required reserves,how much money can the banking system potentially create for a given amount of new deposits?

Suppose a bank has $200,000 in deposits,a required reserve ratio of 15 percent,and total reserves of $100,000.Then it has excess reserves of

Initially a bank has a required reserve ratio of 10 percent and no excess reserves.If $1,000 is deposited into the bank,then,ceteris paribus,

A single bank with $10,000 of reserves and a reserve ratio of 25 percent could support total transactions account balances of at most

If total reserves for a bank are $25,000,excess reserves are $5,000,and demand deposits are $100,000,the money multiplier must be

Which of the following is not considered to be a private depository institution?

The majority of the basic money supply (M1)in the United States is in the form of

When the reserve requirement changes,which of the following will change for an individual bank?

If excess reserves are $30,000,demand deposits are $100,000,and the required reserve ratio is 15 percent,then total reserves are

The ratio of a bank's total reserves to its total transactions deposits is known as the

Suppose a bank has $100,000 in deposits,a required reserve ratio of 20 percent,and total reserves of $20,000.Then this bank can make new loans in the amount of

Transactions accounts allow for direct payment to a third party.

Suppose a banking system has $200 million in deposits,a required reserve ratio of 10 percent,and total bank reserves of $35 million.Then the potential increase in deposit creation for the whole banking system is equal to

If bank customers decide as a group to pay off their loans and to not take out any new loans,ceteris paribus,

Table 13.1 XYZ Bank Balance Sheet Refer to Table 13.1.With a required reserve ratio of 12 percent,XYZ Bank would have excess reserves of

What are the constraints on deposit creation for the banking system?

Table 13.2 ABC Bank Balance Sheet Refer to Table 13.2.If ABC Bank has a required reserve ratio of 15 percent,it can legally make a onetime maximum loan of

Which of the following is not true about M1?

Which of the following is not included in M1?

Which of the following gave the U.S.federal government permanent authority to issue money?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters