Exam 35: Money Creation

Assume that the required reserve ratio is 5 percent.If a commercial bank has $2 million cash in its vault, $1 million in government securities, $3 million on deposit at the Fed, and $60 million in checkable deposits, then its excess reserves equal

If the banking system has $20 billion in excess reserves and the reserve ratio is 10 percent, the system can increase its loans by a maximum of $22 billion.

The accompanying table gives data for a commercial bank or thrift.In row 2, the number appropriate for space X is

Actual reserves equal required reserves plus excess reserves.

Which of the following transactions has the immediate effect of increasing the money supply M1?

A bank's net worth is the

A bank can get additional excess reserves by doing any of the following except

If the reserve ratio is 15 percent and commercial bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired checkable deposits, then the relevant monetary multiplier for the banking system will be

If all depositors of a bank were to try withdrawing all their deposits at the same time, a good solid bank should be able to meet all the withdrawals.

The higher the reserve requirement, the lower is the monetary multiplier.

If a commercial banking system has $200,000 in checkable deposits, actual reserves of $70,000, and a reserve ratio of 20 percent, then the banking system can expand the supply of money by a maximum of $180,000.Topic: The Monetary Multiplier

Excess reserves are the amount by which required reserves exceed actual reserves.

Overnight loans from one bank to another for reserve purposes entail an interest rate called the

The relative importance of various asset items on a commercial bank's balance sheet reflects a bank's pursuit of which two conflicting goals?

Only one commercial bank in the banking system has an excess reserve, and its excess reserve is $400,000.This bank makes a new loan of $300,000 and keeps an excess reserve of $100,000.If the required reserve ratio for all banks is 12.5 percent, the potential expansion of the money supply from this new loan is

The granting of a $10,000 loan and the purchase of a $10,000 government bond from a securities dealer by a commercial bank would have the same effect on the money supply.

Money is "created" when

The primary purpose of the legal reserve requirement is to

When bankers hold excess reserves,

When a bank grants a loan, the money supply M1 will increase, even if the funds from the loan are not spent.