Question 1

When a bank has a check drawn and cleared against it:

Accepted Answer

A)  excess reserves in the banking system decline. 
B)  the nation's total money supply falls. 
C)  the bank's balance sheet does not change. 
D)  the amount of required reserves the bank must have will fall. 
A)  excess reserves in the banking system decline. 
B)  the nation's total money supply falls. 
C)  the bank's balance sheet does not change. 
D)  the amount of required reserves the bank must have will fall.

Question 2

Use the following balance sheet for the ABC National Bank in answering the question.Assume the required reserve ratio is 20 percent. 
$\begin{array}{c}
\begin{array}{lll}
\quad\quad\quad\underline{\text { Assets}}\
\text { Reserves}\
\text { Securities}\
\text { Loans}\
\text { Property} 
\end{array}
\begin{array}{l}
\
\$ 27,000 \
50,000 \
33,000 \
200,000
\end{array}
\begin{array}{lll}
\quad\quad \underline{\text { Liabilities \& Net Worth }}\
\text { Checkable Deposits}\
\text {  Stock Shares}\
\
\
\end{array}
\begin{array}{lll}
\
\$1,100\
200,000\
\
\
\end{array}
\end{array}$

Refer to the data.If the original balance sheet was for the commercial banking system,rather than a single bank,loans and checkable deposits could have been expanded by a maximum of:

Accepted Answer

A)  $8,000. 
B)  $15,000. 
C)  $48,000. 
D)  $25,000. 
A)  $8,000. 
B)  $15,000. 
C)  $48,000. 
D)  $25,000.

Question 3

Answer the question on the basis of the following table for a commercial bank or thrift: $\begin{array}{c}
\begin{array}{c}
(1)\
\text {Legal Reserve}\
\underline{\text {Ratio (\%)}}\
10 \
20 \
25 \
30
\end{array}
\begin{array}{c}
(2)\
\text {Checkable}\
\underline{\text {Deposits}}\
 \$ 40,000 \
40,000\
40,000\
40,000
\end{array}
\begin{array}{c}
(3)\
\text {Actual}\
\underline{\text {Reserves}}\
\$ 10,000 \
10,000\
10,000\
10,000
\end{array}
\end{array}$

Refer to the table.When the legal reserve ratio is 10 percent,the money-creating potential of this single bank is:

Accepted Answer

A)  $0. 
B)  $6,000. 
C)  $30,000. 
D)  $60,000. 
A)  $0. 
B)  $6,000. 
C)  $30,000. 
D)  $60,000.

Question 4

In an uncontrolled or unregulated system,commercial bank lending will tend to intensify the business cycle.

Accepted Answer

A) True 
 B)False

Question 5

Answer the question on the basis of the following consolidated balance sheet for the commercial banking system.Assume the required reserve ratio is 10 percent.All figures are in billions. $\begin{array}{c}
\begin{array}{lll}
\quad\quad\quad\underline{\text { Assets}}\
\text { Reserves}\
\text { Securities}\
\text { Loans}\
\text { Property} 
\end{array}
\begin{array}{l}
\
\$30\
130 \
70\
200
\end{array}
\begin{array}{lll}
\quad\quad \underline{\text { Liabilities \& Net Worth }}\
\text { Checkable Deposits}\
\text {  Stock Shares}\
\
\
\end{array}
\begin{array}{lll}
\
\$300\
130\
\
\
\end{array}
\end{array}$

Refer to the data.The commercial banking system has excess reserves of:

Accepted Answer

A)  $0 billion. 
B)  $30 billion. 
C)  $60 billion. 
D)  $70 billion. 
A)  $0 billion. 
B)  $30 billion. 
C)  $60 billion. 
D)  $70 billion.

Question 6

When the receipts given by goldsmiths to depositors were used to make purchases:

Accepted Answer

A)  the gold standard was created. 
B)  existing banking laws were violated. 
C)  the receipts became in effect paper money. 
D)  a fractional reserve banking system was created. 
A)  the gold standard was created. 
B)  existing banking laws were violated. 
C)  the receipts became in effect paper money. 
D)  a fractional reserve banking system was created.

Question 7

Answer the question on the basis of the following information about a banking system: new currency deposited in the system = $40 billion;legal reserve ratio = 0.20;excess reserves prior to the currency deposit = $0. Refer to the information.The $40 billion deposit of currency into checking accounts will create excess reserves of:

Accepted Answer

A)  $20 billion. 
B)  $32 billion. 
C)  $40 billion. 
D)  $0. 
A)  $20 billion. 
B)  $32 billion. 
C)  $40 billion. 
D)  $0.

Question 8

The multiple by which the commercial banking system can expand the supply of money on the basis of excess reserves:

Accepted Answer

A)  is larger the smaller the required reserve ratio. 
B)  is the reciprocal of the bank's actual reserves. 
C)  is directly or positively related to the size of the required reserve ratio. 
D)  will be zero when the required reserve ratio is 100 percent. 
A)  is larger the smaller the required reserve ratio. 
B)  is the reciprocal of the bank's actual reserves. 
C)  is directly or positively related to the size of the required reserve ratio. 
D)  will be zero when the required reserve ratio is 100 percent.

Question 9

If actual reserves in the banking system are $8,000,checkable deposits are $70,000,and the legal reserve ratio is 10 percent,then excess reserves are:

Accepted Answer

A)  zero. 
B)  $1,000. 
C)  $2,000. 
D)  $500. 
A)  zero. 
B)  $1,000. 
C)  $2,000. 
D)  $500.

Question 10

A commercial bank's reserves are:

Accepted Answer

A)  liabilities to both the commercial bank and the Federal Reserve Bank holding them. 
B)  liabilities to the commercial bank and assets to the Federal Reserve Bank holding them. 
C)  assets to both the commercial bank and the Federal Reserve Bank holding them. 
D)  assets to the commercial bank and liabilities to the Federal Reserve Bank holding them. 
A)  liabilities to both the commercial bank and the Federal Reserve Bank holding them. 
B)  liabilities to the commercial bank and assets to the Federal Reserve Bank holding them. 
C)  assets to both the commercial bank and the Federal Reserve Bank holding them. 
D)  assets to the commercial bank and liabilities to the Federal Reserve Bank holding them.

Question 11

The amount that a commercial bank can lend is determined by its:

Accepted Answer

A)  required reserves. 
B)  excess reserves. 
C)  outstanding loans. 
D)  outstanding checkable deposits. 
A)  required reserves. 
B)  excess reserves. 
C)  outstanding loans. 
D)  outstanding checkable deposits.

Question 12

If the reserve requirement is 20 percent,the monetary multiplier will be 4.

Accepted Answer

A) True 
 B)False

Question 13

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,it could safely expand its loans by:

Accepted Answer

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

Question 14

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 commercial banking system has excess reserves of:

Accepted Answer

A)  $9 billion. 
B)  $7 billion. 
C)  $6.1 billion. 
D)  $5 billion. 
A)  $9 billion. 
B)  $7 billion. 
C)  $6.1 billion. 
D)  $5 billion.

Question 15

Answer the question on the basis of the following consolidated balance sheet for the commercial banking system.Assume the required reserve ratio is 10 percent.All figures are in billions. $\begin{array}{c}
\begin{array}{lll}
\quad\quad\quad\underline{\text { Assets}}\
\text { Reserves}\
\text { Securities}\
\text { Loans}\
\text { Property} 
\end{array}
\begin{array}{l}
\
\$30\
130 \
70\
200
\end{array}
\begin{array}{lll}
\quad\quad \underline{\text { Liabilities \& Net Worth }}\
\text { Checkable Deposits}\
\text {  Stock Shares}\
\
\
\end{array}
\begin{array}{lll}
\
\$300\
130\
\
\
\end{array}
\end{array}$  Refer to the data.After the deposit of $10 billion of new currency,the maximum amount by which this commercial banking system can expand the supply of money by lending is:

Accepted Answer

A)  $9 billion. 
B)  $45 billion. 
C)  $36 billion. 
D)  $90 billion. 
A)  $9 billion. 
B)  $45 billion. 
C)  $36 billion. 
D)  $90 billion.

Question 16

When a check is drawn and cleared,the

Accepted Answer

A)  reserves and deposits of both the bank against which the check is cleared and the bank receiving the check are unchanged by this transaction. 
B)  bank against which the check is cleared loses reserves and deposits equal to the amount of the check. 
C)  bank receiving the check loses reserves and deposits equal to the amount of the check. 
D)  bank against which the check is cleared acquires reserves and deposits equal to the amount of the check. 
A)  reserves and deposits of both the bank against which the check is cleared and the bank receiving the check are unchanged by this transaction. 
B)  bank against which the check is cleared loses reserves and deposits equal to the amount of the check. 
C)  bank receiving the check loses reserves and deposits equal to the amount of the check. 
D)  bank against which the check is cleared acquires reserves and deposits equal to the amount of the check.

Question 17

Suppose a commercial bank has checkable deposits of $100,000 and the legal reserve ratio is 10 percent.If the bank's required and excess reserves are equal,then its actual reserves:

Accepted Answer

A)  are $1,000,000. 
B)  are $10,000. 
C)  are $20,000. 
D)  cannot be determined from the given information. 
A)  are $1,000,000. 
B)  are $10,000. 
C)  are $20,000. 
D)  cannot be determined from the given information.

Question 18

Banks create money when they:

Accepted Answer

A)  allow loans to mature. 
B)  accept deposits of cash. 
C)  buy government bonds from households. 
D)  sell government bonds to households. 
A)  allow loans to mature. 
B)  accept deposits of cash. 
C)  buy government bonds from households. 
D)  sell government bonds to households.

Question 19

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 $300. 
C)  net worth is $100. 
D)  annual profit is $200. 
A)  assets are $1,000. 
B)  liabilities are $300. 
C)  net worth is $100. 
D)  annual profit is $200.

Question 20

Answer the question on the basis of the following information about a banking system: new currency deposited in the system = $40 billion;legal reserve ratio = 0.20;excess reserves prior to the currency deposit = $0. Refer to the information.The $40 billion deposit of currency into checking accounts will initially create:

Accepted Answer

A)  $8 billion of new checkable deposits. 
B)  $10 billion of new checkable deposits. 
C)  $40 billion of new checkable deposits. 
D)  $200 billion of new checkable deposits. 
A)  $8 billion of new checkable deposits. 
B)  $10 billion of new checkable deposits. 
C)  $40 billion of new checkable deposits. 
D)  $200 billion of new checkable deposits.

When a bank has a check drawn and cleared against it:

In an uncontrolled or unregulated system,commercial bank lending will tend to intensify the business cycle.

When the receipts given by goldsmiths to depositors were used to make purchases:

The multiple by which the commercial banking system can expand the supply of money on the basis of excess reserves:

If actual reserves in the banking system are $8,000,checkable deposits are $70,000,and the legal reserve ratio is 10 percent,then excess reserves are:

A commercial bank's reserves are:

The amount that a commercial bank can lend is determined by its:

If the reserve requirement is 20 percent,the monetary multiplier will be 4.

When a check is drawn and cleared,the

Suppose a commercial bank has checkable deposits of $100,000 and the legal reserve ratio is 10 percent.If the bank's required and excess reserves are equal,then its actual reserves:

Banks create money when they:

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:

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An Introduction to Macroeconomics

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Exam 34: Money Creation

When a bank has a check drawn and cleared against it:

In an uncontrolled or unregulated system,commercial bank lending will tend to intensify the business cycle.

When the receipts given by goldsmiths to depositors were used to make purchases:

The multiple by which the commercial banking system can expand the supply of money on the basis of excess reserves:

If actual reserves in the banking system are $8,000,checkable deposits are $70,000,and the legal reserve ratio is 10 percent,then excess reserves are:

A commercial bank's reserves are:

The amount that a commercial bank can lend is determined by its:

If the reserve requirement is 20 percent,the monetary multiplier will be 4.

When a check is drawn and cleared,the

Suppose a commercial bank has checkable deposits of $100,000 and the legal reserve ratio is 10 percent.If the bank's required and excess reserves are equal,then its actual reserves:

Banks create money when they:

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:

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