Exam 14: Banking and the Money Supply.

Suppose the reserve requirement ratio is 20 percent. Assuming no bank holds excess reserves and nobody withdraws cash, a $10,000 injection of new reserves by the Fed could create _____

In the money and credit expansion process, the total change in checkable deposits is equal to the initial change in excess reserves _____

Table 14.2 -Refer to Table 14.2 for the balance sheet of Countybank. If the required reserve ratio is 10 percent, this bank alone can now increase its lending by _____

Suppose checking deposits increase by $6,000 after all rounds of the money-creation process when the Fed buys $1,200 worth of U.S. government securities. This implies that the maximum value of the required reserve ratio would be _____

If the Fed wishes to reduce the money supply, it can sell U.S. government securities to member banks.

Suppose the Fed sells $10 million in government securities to a commercial bank. If the required reserve ratio is 0.2, what is the maximum amount by which checkable deposits in the banking system can change?

Asymmetric information in financial markets exists when _____

If a bank's reserves are exactly equal to the required amount of reserves, then it has no excess reserves.

Which of the following measures did the Fed take during the uncertain days following the terrorist attacks of September 11, 2001?

If an increase of $10 million in excess reserves increases checkable deposits in the banking system by a maximum of $50 million, the required reserve ratio would be _____

Table 14.3 -Refer to Table 14.3 for the balance sheet of Leftbank. Leftbank's total reserves _____

Banks want to minimize their holdings of excess reserves because _____

Suppose a bank has $6,000 in checkable deposits and the required reserve ratio is 0.2. If the bank wishes to hold no excess reserves, its actual reserves will be _____

The simple money multiplier _____

Suppose the Fed purchases $5,000 in U.S. government securities from the Last National Bank and the Last National Bank's account at the Federal Reserve district bank increases by $5,000. Which of the following is a result of this transaction?

The M1 money supply consists of _____

Banks differ from other types of businesses because banks _____

If a bank borrows $1,000 from the Fed and lends it out, the bank sets in motion a process that will result in an expansion of the money supply by a multiple of that $1,000.

Federal Reserve notes outstanding account for about _____ of Fed liabilities.

Banks minimize the risk of loss to depositors by _____