Exam 25: Monetary Institutions

Exhibit 25-1 A bank's assets consist of $500,000 in total reserves,$1,600,000 in loans,and a building worth $1,200,000.Its liabilities and capital consist of $2,000,000 in demand deposits and $1,300,000 in capital. Refer to Exhibit 25-1.If the required reserve ratio is 20 percent,what is the level of the bank's excess reserves? How much money could the excess reserves be used to create in the banking system as a result?

If the reserve requirement for a bank is $200,000 for a deposit of $1 million,then the money multiplier is:

Which of the following is included in M2 but is not included in M1?

If a bank had demand deposits of $50 million and it faced a 25 percent required reserve ratio,it would be required to have how many reserves?

If banks faced a 100 percent reserve requirement,a $10,000 addition to banking reserves would increase the money supply by:

The process of money creation can be reversed:

Suppose you found $10,000 hidden under a rock and deposited it in a demand deposit account at your bank.If the reserve requirement was 10 percent,your deposit would initially add ____ to total demand deposits and over time increase the money supply by a maximum of ____.

The existence of inflation and other possible uncertainties reduces the usefulness of money as a store of value.

Which of the following is not a correct statement about money?

One point virtually all economists agree on when defining money is that:

If a bank gets a $100,000 new deposit,chooses to lend out $85,000,and increases its excess reserves by $5,000 at the same time,then the reserve requirement is:

Which of the following changes would clearly decrease the supply of money in the banking system?

A decrease in savings deposits would ____ M1 and ____ M2.

Which of the following is not a form of money?

If you deposit $8,000 in a bank,calculate how much the bank must keep as required reserves and how much it can loan out if the required reserve ratio was 5 percent.If it was 8 percent? 13 percent? 26 percent?

Which of the following assets is most liquid?

If a bank has $1 million in demand deposits,$350,000 in reserves,and faces a 30 percent reserve requirement,the amount of money that a bank could initially create by loaning out their excess reserves is:

Savings accounts are the most liquid of all assets because they can be quickly and easily transferred.

A bank's capital is:

M1 includes: