Question 1

The primary purpose of the legal reserve requirement is to:

Accepted Answer

A)  prevent banks from hoarding too much vault cash. 
B)  provide a means by which the monetary authorities can influence the lending ability of commercial banks. 
C)  prevent commercial banks from earning excess profits. 
D)  provide a dependable source of interest income for commercial banks. 
A)  prevent banks from hoarding too much vault cash. 
B)  provide a means by which the monetary authorities can influence the lending ability of commercial banks. 
C)  prevent commercial banks from earning excess profits. 
D)  provide a dependable source of interest income for commercial banks.

Question 2

The federal funds market is the market in which:

Accepted Answer

A)  banks borrow from the Federal Reserve Banks. 
B)  U.S.securities are bought and sold. 
C)  banks borrow reserves from one another on an overnight basis. 
D)  Federal Reserve Banks borrow from one another. 
A)  banks borrow from the Federal Reserve Banks. 
B)  U.S.securities are bought and sold. 
C)  banks borrow reserves from one another on an overnight basis. 
D)  Federal Reserve Banks borrow from one another.

Question 3

Suppose a credit union has checkable deposits of $500,000 and the legal reserve ratio is 10 percent.If the institution has excess reserves of $4,000,then its actual reserves are:

Accepted Answer

A)  $46,000. 
B)  $50,000. 
C)  $54,000. 
D)  $4,000. 
A)  $46,000. 
B)  $50,000. 
C)  $54,000. 
D)  $4,000.

Question 4

A bank that has liabilities of $150 billion and a net worth of $20 billion must have:

Accepted Answer

A)  excess reserves of $130 billion. 
B)  assets of $150 billion. 
C)  excess reserves of $150 billion. 
D)  assets of $170 billion. 
A)  excess reserves of $130 billion. 
B)  assets of $150 billion. 
C)  excess reserves of $150 billion. 
D)  assets of $170 billion.

Question 5

Answer the question on the basis of the following table for a commercial bank or thrift:   Refer to row 4 in the table.The number appropriate for space Z is:

Accepted Answer

A)  $10,000. 
B)  $70,000. 
C)  $48,000. 
D)  zero. 
A)  $10,000. 
B)  $70,000. 
C)  $48,000. 
D)  zero.

Question 6

When a commercial bank has excess reserves:

Accepted Answer

A)  it is in a position to make additional loans. 
B)  its actual reserves are less than its required reserves. 
C)  it is charging too high an interest rate on its loans. 
D)  its reserves exceed its assets. 
A)  it is in a position to make additional loans. 
B)  its actual reserves are less than its required reserves. 
C)  it is charging too high an interest rate on its loans. 
D)  its reserves exceed its assets.

Question 7

Assume the Standard Internet Company negotiates a loan for $5,000 from the Metro National Bank and receives a checkable deposit for that amount in exchange for its promissory note (IOU).As a result of this transaction:

Accepted Answer

A)  the supply of money is increased by $5,000. 
B)  the supply of money declines by the amount of the loan. 
C)  a claim has been "demonetized." 
D)  the Metro Bank acquires reserves from other banks. 
A)  the supply of money is increased by $5,000. 
B)  the supply of money declines by the amount of the loan. 
C)  a claim has been "demonetized." 
D)  the Metro Bank acquires reserves from other banks.

Question 8

Answer the question on the basis of the following consolidated balance sheet for the commercial banking system.Assume the required reserve ratio is 30 percent.All figures are in billions. $\begin{array}{c}
\begin{array}{lll}
\quad\quad\quad\underline{\text { Assets}}\
\text { Reserves}\
\text { Securities}\
\text { Loans}\
\text { Property} 
\end{array}
\begin{array}{l}
\
\$ 51 \
109 \
100\
10
\end{array}
\begin{array}{lll}
\quad\quad \underline{\text { Liabilities \& Net Worth }}\
\text { Checkable Deposits}\
\text {  Stock Shares}\
\
\
\end{array}
\begin{array}{lll}
\
\$140\
130\
\
\
\end{array}
\end{array}$

Refer to the data.The maximum amount by which the commercial banking system can expand the supply of money by lending is:

Accepted Answer

A)  $30 billion. 
B)  $23.1 billion. 
C)  $27 billion. 
D)  $15 billion. 
A)  $30 billion. 
B)  $23.1 billion. 
C)  $27 billion. 
D)  $15 billion.

Question 9

Answer the question on the basis of the following table for a commercial bank or thrift:   Refer to row 2 in the table.The number appropriate for space X is:

Accepted Answer

A)  $20,000. 
B)  $60,000. 
C)  $200,000. 
D)  $100,000. 
A)  $20,000. 
B)  $60,000. 
C)  $200,000. 
D)  $100,000.

Question 10

The claims of the owners of a firm against the firm's assets are called:

Accepted Answer

A)  working capital. 
B)  assets. 
C)  net worth. 
D)  liabilities. 
A)  working capital. 
B)  assets. 
C)  net worth. 
D)  liabilities.

Question 11

Suppose that a bank's actual reserves are $5 million,its checkable deposits are $5 million,and its excess reserves are $3 million.The reserve requirement must be:

Accepted Answer

A)  40 percent. 
B)  20 percent. 
C)  10 percent. 
D)  5 percent. 
A)  40 percent. 
B)  20 percent. 
C)  10 percent. 
D)  5 percent.

Question 12

Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r } 
\text { Reserves } & \$ 100 \
\text { Checkable Deposits } & 1,000 \
\text { Loans (to customers) } & 300 \
\text { Property } & 400 \
\text { Securities (owned) } & 300 \
\text { Stock Shares } & 100
\end{array}$ Refer to the information and assume that Moolah Bank is "loaned up." If it receives a $100 deposit of currency,the banking system of which Moolah is a part could expand loans by:

Accepted Answer

A)  $100. 
B)  $90. 
C)  $900. 
D)  $1,000. 
A)  $100. 
B)  $90. 
C)  $900. 
D)  $1,000.

Question 13

The monetary multiplier and the spending multiplier are two ways of referring to the same concept.

Accepted Answer

A) True 
 B)False

Question 14

The greater the leverage in the financial system,all else equal:

Accepted Answer

A)  the smaller the monetary multiplier. 
B)  the smaller the profit and loss margins of financial firms. 
C)  the greater the stability of the financial system. 
D)  the greater the instability of the financial system. 
A)  the smaller the monetary multiplier. 
B)  the smaller the profit and loss margins of financial firms. 
C)  the greater the stability of the financial system. 
D)  the greater the instability of the financial system.

Question 15

Loans made to customers are a liability on a bank's balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

A bank that has assets of $85 billion and a net worth of $10 billion must have:

Accepted Answer

A)  liabilities of $75 billion. 
B)  excess reserves of $10 billion. 
C)  liabilities of $10 billion. 
D)  excess reserves of $75 billion. 
A)  liabilities of $75 billion. 
B)  excess reserves of $10 billion. 
C)  liabilities of $10 billion. 
D)  excess reserves of $75 billion.

Question 17

Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r } 
\text { Reserves } & \$ 100 \
\text { Checkable Deposits } & 1,000 \
\text { Loans (to customers) } & 300 \
\text { Property } & 400 \
\text { Securities (owned) } & 300 \
\text { Stock Shares } & 100
\end{array}$ Assume that the listed amounts constitute this bank's complete set of accounts.Moolah's:

Accepted Answer

A)  assets are $1,000. 
B)  liabilities are $1,000. 
C)  net worth is zero. 
D)  profit is $1,000. 
A)  assets are $1,000. 
B)  liabilities are $1,000. 
C)  net worth is zero. 
D)  profit is $1,000.

Question 18

When a bank loan is repaid,the supply of money:

Accepted Answer

A)  is constant,but its composition will have changed. 
B)  is decreased. 
C)  is increased. 
D)  may either increase or decrease. 
A)  is constant,but its composition will have changed. 
B)  is decreased. 
C)  is increased. 
D)  may either increase or decrease.

Question 19

The banking system can lend by a multiple of its excess reserves because lending does not result in a loss of reserves to the banking system as a whole.

Accepted Answer

A) True 
 B)False

Question 20

The supply of money increases when the public buys government securities from commercial banks.

Accepted Answer

A) True 
 B)False

The primary purpose of the legal reserve requirement is to:

The federal funds market is the market in which:

Suppose a credit union has checkable deposits of $500,000 and the legal reserve ratio is 10 percent.If the institution has excess reserves of $4,000,then its actual reserves are:

A bank that has liabilities of $150 billion and a net worth of $20 billion must have:

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to row 4 in the table.The number appropriate for space Z is:

When a commercial bank has excess reserves:

Assume the Standard Internet Company negotiates a loan for $5,000 from the Metro National Bank and receives a checkable deposit for that amount in exchange for its promissory note (IOU).As a result of this transaction:

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to row 2 in the table.The number appropriate for space X is:

The claims of the owners of a firm against the firm's assets are called:

Suppose that a bank's actual reserves are $5 million,its checkable deposits are $5 million,and its excess reserves are $3 million.The reserve requirement must be:

The monetary multiplier and the spending multiplier are two ways of referring to the same concept.

The greater the leverage in the financial system,all else equal:

Loans made to customers are a liability on a bank's balance sheet.

A bank that has assets of $85 billion and a net worth of $10 billion must have:

Answer the question on the basis of the following information for the Moolah Bank. Reserves \ 100 Checkable Deposits 1,000 Loans (to customers) 300 Property 400 Securities (owned) 300 Stock Shares 100 Assume that the listed amounts constitute this bank's complete set of accounts.Moolah's:

When a bank loan is repaid,the supply of money:

The banking system can lend by a multiple of its excess reserves because lending does not result in a loss of reserves to the banking system as a whole.

The supply of money increases when the public buys government securities from commercial banks.

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

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Exam 34: Money Creation

The primary purpose of the legal reserve requirement is to:

The federal funds market is the market in which:

Suppose a credit union has checkable deposits of $500,000 and the legal reserve ratio is 10 percent.If the institution has excess reserves of $4,000,then its actual reserves are:

A bank that has liabilities of $150 billion and a net worth of $20 billion must have:

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to row 4 in the table.The number appropriate for space Z is:

When a commercial bank has excess reserves:

Assume the Standard Internet Company negotiates a loan for $5,000 from the Metro National Bank and receives a checkable deposit for that amount in exchange for its promissory note (IOU).As a result of this transaction:

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to row 2 in the table.The number appropriate for space X is:

The claims of the owners of a firm against the firm's assets are called:

Suppose that a bank's actual reserves are $5 million,its checkable deposits are $5 million,and its excess reserves are $3 million.The reserve requirement must be:

The monetary multiplier and the spending multiplier are two ways of referring to the same concept.

The greater the leverage in the financial system,all else equal:

Loans made to customers are a liability on a bank's balance sheet.

A bank that has assets of $85 billion and a net worth of $10 billion must have:

Answer the question on the basis of the following information for the Moolah Bank. Reserves \ 100 Checkable Deposits 1,000 Loans (to customers) 300 Property 400 Securities (owned) 300 Stock Shares 100 Assume that the listed amounts constitute this bank's complete set of accounts.Moolah's:

When a bank loan is repaid,the supply of money:

The banking system can lend by a multiple of its excess reserves because lending does not result in a loss of reserves to the banking system as a whole.

The supply of money increases when the public buys government securities from commercial banks.

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters