Question 1

Which of the following is an asset of a bank and a liability for its customers?

Accepted Answer

A) deposits of its customers and loans to its customers 
B) deposits of its customers but not loans to its customers 
C) loans to its customers but not the deposits of its customers 
D) neither the deposits of its customers nor the loans to its customers 
A) deposits of its customers and loans to its customers 
B) deposits of its customers but not loans to its customers 
C) loans to its customers but not the deposits of its customers 
D) neither the deposits of its customers nor the loans to its customers

Question 2

The manager of the bank where you work tells you that your bank has $10 million in excess reserves.She also tells you that the bank has $400 million in deposits and $375 million dollars in loans.Given this information you find that the reserve requirement must be

Accepted Answer

A) 10/400. 
B) 25/400. 
C) 35/400. 
D) 15/400. 
A) 10/400. 
B) 25/400. 
C) 35/400. 
D) 15/400.

Question 3

A bank has an 8 percent reserve requirement,$10,000 in deposits,and has loaned out all it can given the reserve requirement.

Accepted Answer

A) It has $80 in reserves and $9,920 in loans. 
B) It has $800 in reserves and $9,200 in loans. 
C) It has $1,250 in reserves and $8,750 in loans. 
D) None of the above is correct. 
A) It has $80 in reserves and $9,920 in loans. 
B) It has $800 in reserves and $9,200 in loans. 
C) It has $1,250 in reserves and $8,750 in loans. 
D) None of the above is correct.

Question 4

The money multiplier equals

Accepted Answer

A) 1/R,where R represents the quantity of reserves in the economy. 
B) 1/R,where R represents the reserve ratio for all banks in the economy. 
C) 1/(1+R),where R represents the quantity of reserves in the economy. 
D) 1/(1+R),where R represents the reserve ratio for all banks in the economy. 
A) 1/R,where R represents the quantity of reserves in the economy. 
B) 1/R,where R represents the reserve ratio for all banks in the economy. 
C) 1/(1+R),where R represents the quantity of reserves in the economy. 
D) 1/(1+R),where R represents the reserve ratio for all banks in the economy.

Question 5

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600,it has a

Accepted Answer

A) $600 increase in excess reserves and no increase in required reserves. 
B) $600 increase in required reserves and no increase in excess reserves. 
C) $510 increase in excess reserves and a $90 increase in required reserves. 
D) $90 increase in excess reserves and a $510 increase in required reserves. 
A) $600 increase in excess reserves and no increase in required reserves. 
B) $600 increase in required reserves and no increase in excess reserves. 
C) $510 increase in excess reserves and a $90 increase in required reserves. 
D) $90 increase in excess reserves and a $510 increase in required reserves.

Question 6

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150.If customers deposit $50 into the bank,what is the value of the money supply?

Accepted Answer

A) $50 
B) $100 
C) $150 
D) $200 
A) $50 
B) $100 
C) $150 
D) $200

Question 7

A bank has a 20 percent reserve requirement,$8,000 in loans,and has loaned out all it can given the reserve requirement.

Accepted Answer

A) It has $6,400 in deposits. 
B) It has $10,000 in deposits. 
C) It has $9,600 in deposits. 
D) It has $1,600 in deposits. 
A) It has $6,400 in deposits. 
B) It has $10,000 in deposits. 
C) It has $9,600 in deposits. 
D) It has $1,600 in deposits.

Question 8

Under a fractional-reserve banking system,banks

Accepted Answer

A) hold more reserves than deposits. 
B) generally lend out a majority of the funds deposited. 
C) cause the money supply to fall by lending out reserves. 
D) All of the above are correct. 
A) hold more reserves than deposits. 
B) generally lend out a majority of the funds deposited. 
C) cause the money supply to fall by lending out reserves. 
D) All of the above are correct.

Question 9

If the reserve requirement is 5 percent,a bank desires to hold no excess reserves,and it receives a new deposit of $10,then this bank

Accepted Answer

A) must increase its required reserves by $10. 
B) will initially see its total reserves increase by $10.50. 
C) will be able to make new loans up to a maximum of $9.50. 
D) All of the above are correct. 
A) must increase its required reserves by $10. 
B) will initially see its total reserves increase by $10.50. 
C) will be able to make new loans up to a maximum of $9.50. 
D) All of the above are correct.

Question 10

If the reserve ratio is 5 percent,then $1,000 of additional reserves can create up to

Accepted Answer

A) $5,500 of new money. 
B) $5,000 of new money. 
C) $4,000 of new money. 
D) None of the above is correct. 
A) $5,500 of new money. 
B) $5,000 of new money. 
C) $4,000 of new money. 
D) None of the above is correct.

Question 11

If the reserve ratio is 8 percent,then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

Accepted Answer

A) $48,000. 
B) $75,000. 
C) $55,200. 
D) $10,800. 
A) $48,000. 
B) $75,000. 
C) $55,200. 
D) $10,800.

Question 12

A bank has $8,000 in deposits and $6,000 in loans.It has loaned out all it can given the reserve requirement.It follows that the reserve requirement is

Accepted Answer

A) 2.5 percent. 
B) 33.3 percent. 
C) 25 percent. 
D) 75 percent. 
A) 2.5 percent. 
B) 33.3 percent. 
C) 25 percent. 
D) 75 percent.

Question 13

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits.Its reserves amount to

Accepted Answer

A) $8. 
B) $80. 
C) $92. 
D) $920. 
A) $8. 
B) $80. 
C) $92. 
D) $920.

Question 14

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

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 15

If the reserve ratio is 15 percent,the money multiplier is

Accepted Answer

A) 7.7. 
B) 6.7. 
C) 5.7. 
D) 15. 
A) 7.7. 
B) 6.7. 
C) 5.7. 
D) 15.

Question 16

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store.On their respective balance sheets,this loan is

Accepted Answer

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

Question 17

If the reserve ratio is 5 percent,then $500 of additional reserves can create up to

Accepted Answer

A) $10,500 of new money. 
B) $10,000 of new money. 
C) $9,500 of new money. 
D) $2,500 of new money. 
A) $10,500 of new money. 
B) $10,000 of new money. 
C) $9,500 of new money. 
D) $2,500 of new money.

Question 18

If the reserve ratio is 6 percent,then $9,000 of additional reserves can create up to

Accepted Answer

A) $159,000 of new money. 
B) $54,000 of new money. 
C) $150,000 of new money. 
D) $141,000 of new money. 
A) $159,000 of new money. 
B) $54,000 of new money. 
C) $150,000 of new money. 
D) $141,000 of new money.

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

Which of the following is an asset of a bank and a liability for its customers?

The manager of the bank where you work tells you that your bank has $10 million in excess reserves.She also tells you that the bank has $400 million in deposits and $375 million dollars in loans.Given this information you find that the reserve requirement must be

A bank has an 8 percent reserve requirement,$10,000 in deposits,and has loaned out all it can given the reserve requirement.

The money multiplier equals

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600,it has a

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150.If customers deposit $50 into the bank,what is the value of the money supply?

A bank has a 20 percent reserve requirement,$8,000 in loans,and has loaned out all it can given the reserve requirement.

Under a fractional-reserve banking system,banks

If the reserve requirement is 5 percent,a bank desires to hold no excess reserves,and it receives a new deposit of $10,then this bank

If the reserve ratio is 5 percent,then $1,000 of additional reserves can create up to

If the reserve ratio is 8 percent,then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

A bank has $8,000 in deposits and $6,000 in loans.It has loaned out all it can given the reserve requirement.It follows that the reserve requirement is

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits.Its reserves amount to

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

If the reserve ratio is 15 percent,the money multiplier is

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store.On their respective balance sheets,this loan is

If the reserve ratio is 5 percent,then $500 of additional reserves can create up to

If the reserve ratio is 6 percent,then $9,000 of additional reserves can create up to

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

Application International Trade: Part A

Application International Trade: Part B