Question 1

If the reserve ratio is 12 percent,then the money multiplier is

Accepted Answer

A) 9.3. 
B) 8.3. 
C) 7.3. 
D) 12. 
A) 9.3. 
B) 8.3. 
C) 7.3. 
D) 12.

Question 2

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

Accepted Answer

A) does not change the money supply. 
B) increases the money supply. 
C) decreases the money supply. 
D) has an indeterminate effect on the money supply. 
A) does not change the money supply. 
B) increases the money supply. 
C) decreases the money supply. 
D) has an indeterminate effect on the money supply.

Question 3

If the reserve ratio is 12.5 percent,then $1,000 of additional reserves can create up to

Accepted Answer

A) $7,000 of new money. 
B) $8,000 of new money. 
C) $11,500 of new money. 
D) $12,500 of new money. 
A) $7,000 of new money. 
B) $8,000 of new money. 
C) $11,500 of new money. 
D) $12,500 of new money.

Question 4

If the reserve requirement is 10 percent,a bank desires to hold no excess reserves,and it receives a new deposit of $500,it

Accepted Answer

A) must increase required reserves by $50. 
B) will initially see reserves increase by $500. 
C) will be able to use this deposit to make new loans amounting to $450. 
D) All of the above are correct. 
A) must increase required reserves by $50. 
B) will initially see reserves increase by $500. 
C) will be able to use this deposit to make new loans amounting to $450. 
D) All of the above are correct.

Question 5

If the reserve ratio is 10 percent,$1,400 of additional reserves can create up to

Accepted Answer

A) $140 of new money. 
B) $14,000 of new money. 
C) $140,000 of new money. 
D) None of the above is correct. 
A) $140 of new money. 
B) $14,000 of new money. 
C) $140,000 of new money. 
D) None of the above is correct.

Question 6

If the reserve ratio is 4 percent,then $81,250 of new money can be generated by

Accepted Answer

A) $325 of new reserves. 
B) $3,250 of new reserves. 
C) $20,312.50 of new reserves. 
D) $2,031,250 of new reserves. 
A) $325 of new reserves. 
B) $3,250 of new reserves. 
C) $20,312.50 of new reserves. 
D) $2,031,250 of new reserves.

Question 7

First National Bank (FNB)has a reserve ratio of 20 percent,a required reserve ratio of 10 percent,and deposits of $1,000.If FNB receives an additional deposit of $100,

Accepted Answer

A) then it has required reserves of $210 and holds excess reserves of $10. 
B) then it has required reserves of $10 and holds excess reserves of $20. 
C) then it has required reserves of $110 and holds excess reserves of $190. 
D) then it has required reserves of $110 and holds excess reserves of $0. 
A) then it has required reserves of $210 and holds excess reserves of $10. 
B) then it has required reserves of $10 and holds excess reserves of $20. 
C) then it has required reserves of $110 and holds excess reserves of $190. 
D) then it has required reserves of $110 and holds excess reserves of $0.

Question 8

If the reserve requirement is 12 percent and banks desire to hold no excess reserves,when a bank receives a new deposit of $1,000,

Accepted Answer

A) it must increase its required reserves by more than $150. 
B) its total reserves initially increase by $120. 
C) it will be able to make new loans up to a maximum of $880. 
D) None of the above is correct. 
A) it must increase its required reserves by more than $150. 
B) its total reserves initially increase by $120. 
C) it will be able to make new loans up to a maximum of $880. 
D) None of the above is correct.

Question 9

If the reserve ratio is 10 percent,the money multiplier is

Accepted Answer

A) 100. 
B) 10. 
C) 9/10. 
D) 1/10. 
A) 100. 
B) 10. 
C) 9/10. 
D) 1/10.

Question 10

If R represents the reserve ratio for all banks in the economy,then the money multiplier is

Accepted Answer

A) 1/(1-R). 
B) 1/R. 
C) 1/(1+R). 
D) (1+R)/R. 
A) 1/(1-R). 
B) 1/R. 
C) 1/(1+R). 
D) (1+R)/R.

Question 11

The manager of the bank where you work tells you that your bank has $6 million in excess reserves.She also tells you that the bank has $400 million in deposits and $362 million dollars in loans.Given this information you find that the reserve requirement must be

Accepted Answer

A) 44/400. 
B) 6/362. 
C) 38/400. 
D) 32/400. 
A) 44/400. 
B) 6/362. 
C) 38/400. 
D) 32/400.

Question 12

Suppose a bank is operating with a leverage ratio of 10.A 6 percent increase in the value of assets

Accepted Answer

A) will reduce liabilities by 6 percent. 
B) will result in a 60 percent increase in owner's equity. 
C) will result in a 60 percent decrease in owner's equity. 
D) will reduce liabilities by 10 percent. 
A) will reduce liabilities by 6 percent. 
B) will result in a 60 percent increase in owner's equity. 
C) will result in a 60 percent decrease in owner's equity. 
D) will reduce liabilities by 10 percent.

Question 13

If a bank uses $200 of excess reserves to make a new loan when the reserve ratio is 15 percent,this action by itself initially makes the money supply

Accepted Answer

A) and wealth increase by $200. 
B) and wealth decrease by $200. 
C) increase by $200 while wealth does not change. 
D) decrease by $200 while wealth decreases by $200. 
A) and wealth increase by $200. 
B) and wealth decrease by $200. 
C) increase by $200 while wealth does not change. 
D) decrease by $200 while wealth decreases by $200.

Question 14

Reserves are

Accepted Answer

A) the central bank of the U.S. 
B) deposits that banks hold in excess of the required amount. 
C) the purchase of bonds by the Federal Open Market Committee. 
D) deposits that banks have received but have not yet loaned out. 
A) the central bank of the U.S. 
B) deposits that banks hold in excess of the required amount. 
C) the purchase of bonds by the Federal Open Market Committee. 
D) deposits that banks have received but have not yet loaned out.

Question 15

If a bank desires to hold no excess reserves,the reserve requirement is 8 percent,and it receives a new deposit of $500,

Accepted Answer

A) its required reserves increase by $40. 
B) its total reserves initially increase by $460. 
C) it will be able to make a new loan of up to $492. 
D) All of the above are correct. 
A) its required reserves increase by $40. 
B) its total reserves initially increase by $460. 
C) it will be able to make a new loan of up to $492. 
D) All of the above are correct.

Question 16

Suppose the banking system currently has $300 billion in reserves,the reserve requirement is 5 percent,and excess reserves are $30 billion.What is the level of loans?

Accepted Answer

A) $270 billion 
B) $5,400 billion 
C) $6,000 billion 
D) $5,100 billion 
A) $270 billion 
B) $5,400 billion 
C) $6,000 billion 
D) $5,100 billion

Question 17

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves,but at some point banks still have $5 million more they wish to lend out.If the reserve requirement is 10 percent,how much more money can banks create if they lend out the remaining amount?

Accepted Answer

A) $55 million 
B) $50 million 
C) $45 million 
D) $40 million 
A) $55 million 
B) $50 million 
C) $45 million 
D) $40 million

Question 18

If a bank uses $500 of excess reserves to make a new loan when the reserve ratio is 8 percent,this action by itself initially makes the money supply

Accepted Answer

A) and wealth increase by $500. 
B) and wealth decrease by $500. 
C) increase by $500 while wealth does not change. 
D) decrease by $500 while wealth decreases by $500. 
A) and wealth increase by $500. 
B) and wealth decrease by $500. 
C) increase by $500 while wealth does not change. 
D) decrease by $500 while wealth decreases by $500.

Question 19

Bank capital is

Accepted Answer

A) the machinery,structures,and equipment of the bank. 
B) the resources that owners have put into the bank. 
C) the reserves of the bank. 
D) the bank's total assets. 
A) the machinery,structures,and equipment of the bank. 
B) the resources that owners have put into the bank. 
C) the reserves of the bank. 
D) the bank's total assets.

Question 20

If the reserve ratio is 7.5 percent,the money multiplier is

Accepted Answer

A) 7.5. 
B) 10.3. 
C) 13.3. 
D) 11.3. 
A) 7.5. 
B) 10.3. 
C) 13.3. 
D) 11.3.

Exam 16: The Monetary System: Banks and the Money Supply

If the reserve ratio is 12 percent,then the money multiplier is

If you deposit $100 of currency into a demand deposit at a bank,this action by itself

If the reserve ratio is 12.5 percent,then $1,000 of additional reserves can create up to

If the reserve requirement is 10 percent,a bank desires to hold no excess reserves,and it receives a new deposit of $500,it

If the reserve ratio is 10 percent,$1,400 of additional reserves can create up to

If the reserve ratio is 4 percent,then $81,250 of new money can be generated by

First National Bank (FNB)has a reserve ratio of 20 percent,a required reserve ratio of 10 percent,and deposits of $1,000.If FNB receives an additional deposit of $100,

If the reserve requirement is 12 percent and banks desire to hold no excess reserves,when a bank receives a new deposit of $1,000,

If the reserve ratio is 10 percent,the money multiplier is

If R represents the reserve ratio for all banks in the economy,then the money multiplier is

The manager of the bank where you work tells you that your bank has $6 million in excess reserves.She also tells you that the bank has $400 million in deposits and $362 million dollars in loans.Given this information you find that the reserve requirement must be

Suppose a bank is operating with a leverage ratio of 10.A 6 percent increase in the value of assets

If a bank uses $200 of excess reserves to make a new loan when the reserve ratio is 15 percent,this action by itself initially makes the money supply

Reserves are

If a bank desires to hold no excess reserves,the reserve requirement is 8 percent,and it receives a new deposit of $500,

Suppose the banking system currently has $300 billion in reserves,the reserve requirement is 5 percent,and excess reserves are $30 billion.What is the level of loans?

Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves,but at some point banks still have $5 million more they wish to lend out.If the reserve requirement is 10 percent,how much more money can banks create if they lend out the remaining amount?

If a bank uses $500 of excess reserves to make a new loan when the reserve ratio is 8 percent,this action by itself initially makes the money supply

Bank capital is

If the reserve ratio is 7.5 percent,the money multiplier is

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion