Exam 14: B: Money, Banking, and Money Creation

Assume that Johnson deposits $350 of his currency in his account in the XYZ bank.Later the same day Swanson negotiates a loan for $2,000 at the same bank.In what direction and by what amount has this single transaction changed the supply of money?

Mortgage-backed securities are bonds backed by mortgage payments.

Purchasing common stock by writing a cheque best exemplifies money serving as a:

Chartered bank reserves are an asset to chartered banks but a liability to the Bank of Canada holding them.

If a bank has liabilities exceeding its net worth:

A chartered bank sells a $10,000 government securities to a securities dealer.The dealer pays for the bond in cash, which the bank adds to its vault cash.As the result of this single transaction the money supply has:

The purchasing power of the dollar:

Suppose the ABC bank has excess reserves of $4,000 and outstanding demand deposits of $80,000.If the desired reserve ratio is 25 percent, what is the size of the bank's actual cash reserves?

Actual cash reserves equal desired reserves plus excess reserves.

Subprime mortgage loans refer to:

The banking system can lend by a multiple of its excess reserves because lending does not result in a loss of reserves to the banking system as a whole.

The greater the desired reserve ratio, the:

A chartered bank's demand-deposit liabilities can be calculated by:

Which of the following is correct?

Refer to the information below.The maximum amount by which the chartered banking system can expand the supply of money by lending is about: Consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 30 percent.All figures are in billions.

Token money is:

Currency and demand deposits are money because:

A basic argument for using the M1 concept of money is that:

If the monetary authorities want to lower the size of the money multiplier, they should:

Refer to the above information.The value of the dollar in year 3 is: