Exam 19: Money Creation

Exhibit 19-4  Balance sheet of Tucker National Bank Assume all banks in the system started with the balance sheet shown in Exhibit 19-4 and the Fed makes a $1,000 open market purchase. The result would be a(n):

Jeff Kaufman decides to bank with Paris First National Bank (PFN). He opens a checking account by depositing $1,000. According to the PFN balance sheet, after this initial $1,000 checkable deposit, there are $1,000 in:

Suppose the Fed sells $100 million of U.S. securities to the security dealers. If the reserve requirement is 20 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a:

Which of the following events would reduce the size of the "real-world" money multiplier?

Which of the following policy actions by the Fed would cause the money supply to decrease?

If Matt Taylor gets his $800 loan from the Paris First National Bank in cash rather than in the form of a new checkable deposit, the:

The required reserve ratio is required reserves stated as a percentage of checkable deposits.

Exhibit 19-7  Lower Walloon National Bank In Exhibit 19-7, if Mr. Brown pays out all of the proceeds of the loan to Mr. John White who is going to make the renovations of the restaurant, the Lower Walloon National bank will now have:

A bank faces a required reserve ratio of 5 percent. If the bank has $200 million of checkable deposits and $15 million of total reserves, then how large are the bank's excess reserves?

In order for a bank to earn as much profit as possible, its excess reserves should be:

The required reserve ratio is required reserves stated as a percentage of the money supply.

If banks are fully loaned up, have no excess reserves, and the required reserve ratio is raised, the amount that banks can lend is:

If a single banks faces a required reserve ratio of 20 percent, has total reserves of $500,000, and checkable deposit liabilities of $400,000, what is the maximum amount of money this bank could create (add to the money supply)?

A bank's "required reserves" are:

When the Fed purchases government securities, it:

The required reserves of a bank are determined by multiplying the bank's checkable deposits by the required reserve ratio.

The Fed's countercyclical policy during expansion and prosperity includes:

Assume we have a simplified banking system in balance-sheet equilibrium. Also assume that all banks are subject to a uniform 10 percent reserve requirement and checkable deposits are the only form of money. A commercial bank receiving a new checkable deposit of $100 would be able to extend new loans in the amount of:

In a system in which all banks have a uniform reserve requirement, the money multiplier is equal to 1 divided by the required reserve ratio.

Imagine that Odyssey National is a brand new bank, and that its required reserve ratio is 10 percent. If it accepts a $1,000 deposit, then Odyssey National can increase the money supply by: