Exam 20: Money and the Banking System

Mr.Smith now spends the exact amount of money he borrowed to buy equipment from Ms.Jones,paying for it with a check drawn on his account at bank A.Ms.Jones deposits the check in her account at bank B.Once the checks have cleared,compared to its position just after the loan to Mr.Smith,bank A now has had its reserves decreased by

A bank typically makes loans from its ________ reserves.

Suppose the required ratio of reserves to deposits is 1:9,banks have no excess reserves,one person withdraws $10,000 from a checking account and stuffs it under a mattress,and no other person withdraws cash from the banking system.When the process has worked itself out,the money supply will show an additional decline of

The following question refer to the table that follows. Assume that there is a fractional-reserve banking system, that the legal reserve requirements are 10 percent, and that the balance sheet for Bank X is as follows: -Bank X has excess reserves of

After this process has worked its way through the banking system,the initial excess reserves in bank A will have led to an additional increase in the money supply of

The following question are based on the following changes in the balance sheet of Nowhere National Bank. -Which letter best indicates the total effect on Nowhere National Bank's balance sheet after all the transactions just described have taken place?

The cash holdings of a commercial bank are considered part of the bank's

Fractional-reserve banking means that

The total increase in the money supply that can be achieved from a given amount of excess reserves can be found by

Currency in the United States is

Bank investments in short-term government securities that can readily be turned into cash are often referred to as ________ reserves.

The basic distinction between demand deposits and NOW accounts is that NOW accounts

Which of the following provides the best distinction between assets and liabilities?

The basic requirement of money is that it be

The commercial banking system's ability to expand demand deposits is reduced when

Fractional-reserve banking depends on the assumption that

Which of the following legal reserve ratios will generate the greatest amount of excess reserves?

The cumulative expansion process in the commercial banking system will come to an end when a bank's

To be considered money,a financial asset must

The following question refer to the table that follows. Assume that there is a fractional-reserve banking system, that the legal reserve requirements are 10 percent, and that the balance sheet for Bank X is as follows: -Bank X can safely increase its loans and investment by the amount of