Exam 19: Money Creation

Assume that the Paris First National Bank is a thriving bank with deposits of $20 million.If the required reserve ratio is 20 percent and the bank is fully loaned out,the bank will have outstanding loans totaling:

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)?

Which of the following is not an interest-earning asset of commercial banks?

Which of the following correctly describes fractional reserve banking?

Exhibit 19-2 Balance Sheet of Springfield National Bank -In Exhibit 19-2,if Springfield National has excess reserves equal to $300,and then its customers write checks for $200,its excess reserves will fall to:

Bank reserves will increase over time when:

Exhibit 19-5 Balance sheet of Tucker National Bank -If all banks in the system shown in Exhibit 19-5 were identical to Tucker National Bank,the money multiplier for the system would be:

A banking system that provides people immediate access to their deposits,but that allows banks to hold only a portion of those deposits on reserve,is known as:

When the required reserve ratio is changed,

Exhibit 19-3 Balance sheet of Tucker National Bank -Suppose Connie Rich deposits $100,000 into her checking account in the bank shown in Exhibit 19-3.The result would be a:

Exhibit 19-5 Balance sheet of Tucker National Bank -The required reserve ratio in Exhibit 19-5 is:

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:

Assume a simplified banking system subject to a 10 percent required reserve ratio.If there is an initial increase in excess reserves of $90,000 and all possible loans are made,the money supply:

If the Federal Reserve wishes to increase the money supply it should decrease the discount rate and/or decrease the required reserve ratio and/or buy government securities on the open market.

Banks that wish to borrow required reserves can turn to the federal funds market.

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

A decrease in the required reserve ratio will:

When the required reserve ratio is 20 percent,the money multiplier is:

Which of the following is the most frequently used tool the Fed uses to control the supply of money?

If the fractional reserve system did not exist,