Question 1

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve.Its deposits amount to

Accepted Answer

A) $114. 
B) $2,166. 
C) $2,400. 
D) $45,600. 
A) $114. 
B) $2,166. 
C) $2,400. 
D) $45,600.

Question 2

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves.A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000.How much does this bank now have to lend out if it decides to hold only required reserves?

Accepted Answer

A) $27,000 
B) $27,190 
C) $26,190 
D) $9,000 
A) $27,000 
B) $27,190 
C) $26,190 
D) $9,000

Question 3

In a system of 100-percent-reserve banking,

Accepted Answer

A) banks do not accept deposits. 
B) banks do not influence the supply of money. 
C) loans are the only asset item for banks. 
D) All of the above are correct. 
A) banks do not accept deposits. 
B) banks do not influence the supply of money. 
C) loans are the only asset item for banks. 
D) All of the above are correct.

Question 4

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

Accepted Answer

A) 0 and banks create money. 
B) 0 and banks do not create money. 
C) 1 and banks create money 
D) 1 and banks do not create money. 
A) 0 and banks create money. 
B) 0 and banks do not create money. 
C) 1 and banks create money 
D) 1 and banks do not create money.

Question 5

The 2008 credit crunch occurred when banks reduced lending in response to

Accepted Answer

A) ​the loss of asset value for mortgage backed securities and mortgage loans. 
B) ​having too little capital to satisfy capital requirements. 
C) ​an excess of bank capital. 
D) ​an increase in the required reserve ratio. 
A) ​the loss of asset value for mortgage backed securities and mortgage loans. 
B) ​having too little capital to satisfy capital requirements. 
C) ​an excess of bank capital. 
D) ​an increase in the required reserve ratio.

Question 6

If the reserve ratio is 8 percent,then the money multiplier is

Accepted Answer

A) 12.5. 
B) 11.5. 
C) 13.5. 
D) 8. 
A) 12.5. 
B) 11.5. 
C) 13.5. 
D) 8.

Question 7

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits.Its reserves amount to

Accepted Answer

A) $50. 
B) $500. 
C) $4,500. 
D) $4,950. 
A) $50. 
B) $500. 
C) $4,500. 
D) $4,950.

Question 8

In a 100-percent-reserve banking system,if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits,then

Accepted Answer

A) M1 would increase. 
B) M1 would decrease. 
C) M1 would not change. 
D) M1 might rise or fall. 
A) M1 would increase. 
B) M1 would decrease. 
C) M1 would not change. 
D) M1 might rise or fall.

Question 9

In a system of 100-percent-reserve banking,

Accepted Answer

A) banks do not make loans. 
B) currency is the only form of money. 
C) deposits are banks' only assets. 
D) All of the above are correct. 
A) banks do not make loans. 
B) currency is the only form of money. 
C) deposits are banks' only assets. 
D) All of the above are correct.

Question 10

When a bank loans out $1,000,the money supply

Accepted Answer

A) does not change. 
B) decreases. 
C) increases. 
D) may do any of the above. 
A) does not change. 
B) decreases. 
C) increases. 
D) may do any of the above.

Question 11

If the reserve ratio is 100-percent,then a new deposit of $1000 into a bank account

Accepted Answer

A) eventually increases the money supply by $1000. 
B) leaves the size of the money supply unchanged. 
C) eventually decreases the size of the money supply by $1000. 
D) eventually increases the money supply by $2000. 
A) eventually increases the money supply by $1000. 
B) leaves the size of the money supply unchanged. 
C) eventually decreases the size of the money supply by $1000. 
D) eventually increases the money supply by $2000.

Question 12

A bank has a 5 percent reserve requirement,$5,000 in deposits,and has loaned out all it can given the reserve requirement.

Accepted Answer

A) It has $25 in reserves and $4,975 in loans. 
B) It has $250 in reserves and $4,750 in loans. 
C) It has $1,000 in reserves and $4,000 in loans. 
D) None of the above is correct. 
A) It has $25 in reserves and $4,975 in loans. 
B) It has $250 in reserves and $4,750 in loans. 
C) It has $1,000 in reserves and $4,000 in loans. 
D) None of the above is correct.

Question 13

A bank has a 10 percent reserve requirement,$36,000 in loans,and has loaned out all it can given the reserve requirement.

Accepted Answer

A) It has $3,600 in deposits. 
B) It has $32,400 in deposits. 
C) It has $39,600 in deposits. 
D) It has $40,000 in deposits. 
A) It has $3,600 in deposits. 
B) It has $32,400 in deposits. 
C) It has $39,600 in deposits. 
D) It has $40,000 in deposits.

Question 14

If the reserve ratio is 4 percent,then the money multiplier is

Accepted Answer

A) 24. 
B) 25. 
C) 26. 
D) 4. 
A) 24. 
B) 25. 
C) 26. 
D) 4.

Question 15

In a fractional-reserve banking system,a bank

Accepted Answer

A) does not make loans. 
B) does not accept deposits. 
C) keeps only a fraction of its deposits in reserve. 
D) None of the above is correct. 
A) does not make loans. 
B) does not accept deposits. 
C) keeps only a fraction of its deposits in reserve. 
D) None of the above is correct.

Question 16

If the reserve ratio is 8 percent,then an additional $800 of reserves can increase the money supply by as much as

Accepted Answer

A) $6,400. 
B) $8,000. 
C) $12,500. 
D) $10,000. 
A) $6,400. 
B) $8,000. 
C) $12,500. 
D) $10,000.

Question 17

Suppose the banking system currently has $400 billion in reserves,the reserve requirement is 8 percent,and excess reserves amount to $5 billion.What is the level of deposits?

Accepted Answer

A) $5,000 billion 
B) $4,937.5 billion 
C) $5,062.5 billion 
D) $4,995 billion 
A) $5,000 billion 
B) $4,937.5 billion 
C) $5,062.5 billion 
D) $4,995 billion

Question 18

On a bank's T-account,which are part of the bank's assets?

Accepted Answer

A) both deposits made by its customers and reserves 
B) deposits made by its customers but not reserves 
C) reserves but not deposits made by its customers 
D) neither deposits made by its customers nor reserves 
A) both deposits made by its customers and reserves 
B) deposits made by its customers but not reserves 
C) reserves but not deposits made by its customers 
D) neither deposits made by its customers nor reserves

Question 19

If a bank has a reserve ratio of 8 percent,then

Accepted Answer

A) government regulation requires the bank to use at least 8 percent of its deposits to make loans. 
B) the bank's ratio of loans to deposits is 8 percent. 
C) the bank keeps 8 percent of its deposits as reserves and loans out the rest. 
D) the bank keeps 8 percent of its assets as reserves and loans out the rest. 
A) government regulation requires the bank to use at least 8 percent of its deposits to make loans. 
B) the bank's ratio of loans to deposits is 8 percent. 
C) the bank keeps 8 percent of its deposits as reserves and loans out the rest. 
D) the bank keeps 8 percent of its assets as reserves and loans out the rest.

Question 20

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store.On their respective balance sheets,this loan is

Accepted Answer

A) an asset for the bank and a liability for Kellie's Print Shop.The loan increases the money supply. 
B) an asset for the bank and a liability for Kellie's Print Shop.The loan does not increase the money supply. 
C) a liability for the bank and an asset for Kellie's Print Shop.The loan increases the money supply. 
D) a liability for the bank and an asset for Kellie's Print Shop.The loan does not increase the money supply. 
A) an asset for the bank and a liability for Kellie's Print Shop.The loan increases the money supply. 
B) an asset for the bank and a liability for Kellie's Print Shop.The loan does not increase the money supply. 
C) a liability for the bank and an asset for Kellie's Print Shop.The loan increases the money supply. 
D) a liability for the bank and an asset for Kellie's Print Shop.The loan does not increase the money supply.

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

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve.Its deposits amount to

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves.A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000.How much does this bank now have to lend out if it decides to hold only required reserves?

In a system of 100-percent-reserve banking,

Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is

The 2008 credit crunch occurred when banks reduced lending in response to

If the reserve ratio is 8 percent,then the money multiplier is

A bank's reserve ratio is 10 percent and the bank has $5,000 in deposits.Its reserves amount to

In a 100-percent-reserve banking system,if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits,then

In a system of 100-percent-reserve banking,

When a bank loans out $1,000,the money supply

If the reserve ratio is 100-percent,then a new deposit of $1000 into a bank account

A bank has a 5 percent reserve requirement,$5,000 in deposits,and has loaned out all it can given the reserve requirement.

A bank has a 10 percent reserve requirement,$36,000 in loans,and has loaned out all it can given the reserve requirement.

If the reserve ratio is 4 percent,then the money multiplier is

In a fractional-reserve banking system,a bank

If the reserve ratio is 8 percent,then an additional $800 of reserves can increase the money supply by as much as

Suppose the banking system currently has $400 billion in reserves,the reserve requirement is 8 percent,and excess reserves amount to $5 billion.What is the level of deposits?

On a bank's T-account,which are part of the bank's assets?

If a bank has a reserve ratio of 8 percent,then

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store.On their respective balance sheets,this loan 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