Exam 15: Money Creation

Reserves \ 100 Checkable Deposits 1,000 Loans (to customers) 300 Property 400 Securities (owned) 300 Stock Shares 100 Refer to the accompanying table of information for the Moolah Bank. If Moolah Bank is legally "loaned up," the reserve requirement must be

Suppose a credit union has checkable deposits of $500,000 and the legal reserve ratio is 10 percent. If the institution has excess reserves of $4,000, then its actual reserves are

A commercial bank has no excess reserves until a depositor places $2,000 in cash in the bank. The reserve ratio is 10 percent. The bank then lends $1,500 to a borrower. As a consequence of these transactions, the bank'scess reserves are A) not affected. B) increased by $200. C) increased by $300. D) increased by $500.

When a bank has a check drawn and cleared against it,

Suppose a commercial banking system has $100,000 of outstanding checkable deposits and actual reserves of $35,000. If the reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum Amount of

The federal funds market is the market in which

Assets Liabilities and Net Worth Stock Shares \ 400 Reserves 40 Property 300 Securities 160 Loans 80 Demand Deposits 180 The ?gures in the table are for a single commercial bank. All ?gures are in thousands of dollars. If the required reserve ratio is 10 percent, the bank has excess reserves of

If actual reserves in the banking system are $40,000, excess reserves are $10,000, and checkable deposits are $240,000, then the legal reserve requirement is

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?

Consider 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. The $40 billion deposit of new Currency will support total checkable deposits of

Other things equal, if the required reserve ratio was lowered,

Loans made to customers are a liability on a bank's balance sheet.

When people withdraw money from their deposits in the banking system, the

When a bank loan is repaid, the supply of money

A bank has $2 million in checkable deposits. In the bank's balance sheet, this would be part of

A commercial bank has excess reserves of $5,000 and a required reserve ratio of 20 percent. It makes a loan of $6,000 to a borrower. The borrower writes a check for $6,000 that is deposited in another commercial bank. After The check clears, the first bank will be short of reserves in the amount of

(Last Word) The greater the leverage in the financial system, all else equal,

If the Federal Reserve System sells $5 billion of government securities to commercial banks, the banks' reserves would

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

The monetary multiplier and the spending multiplier are two ways of referring to the same concept.