Question 1

If the reserve requirement was 5% and a bank customer makes a deposit of $1,000, the initial result would be:

Accepted Answer

A) a $950 increase in required reserves and a $50 increase in excess reserves. 
B) a $20,000 increase in required reserves and a $950 increase in excess reserves. 
C) a $50 increase in required reserves and a $20,000 increase in excess reserves. 
D) none of the above 
A) a $950 increase in required reserves and a $50 increase in excess reserves. 
B) a $20,000 increase in required reserves and a $950 increase in excess reserves. 
C) a $50 increase in required reserves and a $20,000 increase in excess reserves. 
D) none of the above

Question 2

If a bank gets a $100,000 new deposit, chooses to lend out $75,000, and increases its excess reserves by $5,000 at the same time, then the reserve requirement is:

Accepted Answer

A) 30%. 
B) 25%. 
C) 20%. 
D) unable to be determined from the information given. 
A) 30%. 
B) 25%. 
C) 20%. 
D) unable to be determined from the information given.

Question 3

"Near monies" are:

Accepted Answer

A) included in the M1 definition of the money supply. 
B) highly liquid assets that are close substitutes for money. 
C) stocks, bonds, and real estate. 
D) U.S. notes and Federal Reserve notes. 
E) all of the above. 
A) included in the M1 definition of the money supply. 
B) highly liquid assets that are close substitutes for money. 
C) stocks, bonds, and real estate. 
D) U.S. notes and Federal Reserve notes. 
E) all of the above.

Question 4

If a bank has $1 million in demand deposits, $350,000 in reserves, and faces a 30 percent reserve requirement, the amount of money that a bank could directly create by loaning out their excess reserves is:

Accepted Answer

A) $50,000. 
B) $300,000. 
C) $350,000. 
D) $700,000. 
A) $50,000. 
B) $300,000. 
C) $350,000. 
D) $700,000.

Question 5

A bank receives a demand deposit of $5,000.The bank loans out $3,500 of this deposit and increases its excess reserves by $500.What is the required reserve ratio?

Accepted Answer

A) 10% 
B) 20% 
C) 40% 
D) 60% 
E) 80% 
A) 10% 
B) 20% 
C) 40% 
D) 60% 
E) 80%

Question 6

A reserve requirement of 40 percent would mean that each dollar of reserves could support ____ of demand deposits.

Accepted Answer

A) $0.40 
B) $1.60 
C) $2.50 
D) $4.00 
A) $0.40 
B) $1.60 
C) $2.50 
D) $4.00

Question 7

If the reserve requirement was 15% and a bank customer makes a deposit of $500, the initial result would be:

Accepted Answer

A) a $75 increase in required reserves and a $425 increase in excess reserves. 
B) a $425 increase in required reserves and a $75 increase in excess reserves. 
C) a $75 increase in required reserves and a $3,333 increase in excess reserves. 
D) a $3,333 increase in required reserves and a $425 increase in excess reserves. 
E) a $3,333 increase in required reserves and zero increase in excess reserves. 
A) a $75 increase in required reserves and a $425 increase in excess reserves. 
B) a $425 increase in required reserves and a $75 increase in excess reserves. 
C) a $75 increase in required reserves and a $3,333 increase in excess reserves. 
D) a $3,333 increase in required reserves and a $425 increase in excess reserves. 
E) a $3,333 increase in required reserves and zero increase in excess reserves.

Question 8

Balance Sheet 15-B
A bank's assets consist of $1,000,000 in total reserves, $2,100,000 in loans, and a building worth $1,200,000. Its liabilities and capital consist of $3,000,000 in demand deposits and $1,300,000 in capital.
-Refer to Balance Sheet 15-B.If the required reserve ratio is 20 percent, what is the level of the bank's excess reserves? How much money could the excess reserves be used to create in the banking system as a result?

Accepted Answer

A) $600,000; $600,000 
B) $600,000; $3,000,000 
C) $400,000; $400,000 
D) $400,000; $2,000,000 
A) $600,000; $600,000 
B) $600,000; $3,000,000 
C) $400,000; $400,000 
D) $400,000; $2,000,000

Question 9

Which of the following is false?

Accepted Answer

A) While banks must meet their reserve requirements, they do not want to keep any more of their funds as additional reserves than necessary for safety, because cash assets do not earn any interest. 
B) The combination of the Federal Deposit Insurance Corporation (FDI
C)  and the government's greater willingness to assist distressed banks has largely eliminated bank runs. 
C) Banks earn interest on reserve account with the Federal Reserve, but not on cash on hand. 
D) None of the above is false. 
A) While banks must meet their reserve requirements, they do not want to keep any more of their funds as additional reserves than necessary for safety, because cash assets do not earn any interest. 
B) The combination of the Federal Deposit Insurance Corporation (FDI
C)  and the government's greater willingness to assist distressed banks has largely eliminated bank runs. 
C) Banks earn interest on reserve account with the Federal Reserve, but not on cash on hand. 
D) None of the above is false.

Question 10

A decrease in the excess reserves banks want to hold, together with people depositing currency into their demand deposit accounts, would:

Accepted Answer

A) increase the money supply. 
B) decrease the money supply. 
C) leave the money supply unchanged. 
D) have an indeterminate effect on the money supply. 
A) increase the money supply. 
B) decrease the money supply. 
C) leave the money supply unchanged. 
D) have an indeterminate effect on the money supply.

Question 11

The level of inflation in the early 1980s forced savings and loans to:

Accepted Answer

A) increase interest rates on existing real estate loans. 
B) increase interest rates offered on deposits. 
C) decrease interest rates on savings accounts. 
D) decrease the risk levels of their portfolios. 
A) increase interest rates on existing real estate loans. 
B) increase interest rates offered on deposits. 
C) decrease interest rates on savings accounts. 
D) decrease the risk levels of their portfolios.

Question 12

Credit cards should be included in M1 because they are just like checks.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following was a cause of the savings and loan crisis that occurred in the 1980s?

Accepted Answer

A) relatively low inflation in the 1970s and relatively high inflation in the 1980s 
B) savings and loans investing in high-risk ventures including real estate projects 
C) government deregulation in the 1980s 
D) all of the above 
A) relatively low inflation in the 1970s and relatively high inflation in the 1980s 
B) savings and loans investing in high-risk ventures including real estate projects 
C) government deregulation in the 1980s 
D) all of the above

Question 14

Which of the following changes would clearly increase the supply of money in the banking system?

Accepted Answer

A) an increase in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves 
B) an increase in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves 
C) a decrease in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves 
D) a decrease in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves 
A) an increase in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves 
B) an increase in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves 
C) a decrease in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves 
D) a decrease in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves

Question 15

Suppose you found $10,000 hidden under a rock and deposited it in a demand deposit account at your bank.If the reserve requirement was 20 percent, your deposit would add ____ to total demand deposits; the added loans that the banking system as a whole could make as a result of the deposit would generate ____ in additional demand deposits.

Accepted Answer

A) $2,000; $4,000 
B) $2,000; $40,000 
C) $10,000; $40,000 
D) $10,000; $50,000 
A) $2,000; $4,000 
B) $2,000; $40,000 
C) $10,000; $40,000 
D) $10,000; $50,000

Question 16

Which of the following is true?

Accepted Answer

A) The FDIC sets the reserve requirements for commercial banks. 
B) The Federal Reserve System guarantees the deposits in almost all banks up to a limit of $1,000,000 (extended to $2,500,000 through 2013) per account. 
C) Since the Federal Reserve System was established in 1913, bank failures due to panic withdrawals have been virtually eliminated. 
D) If a bank should fail, the FDIC guarantees that depositors can get their funds up to a limit of $100,000 (extended to $250,000 through 2103) per account. 
A) The FDIC sets the reserve requirements for commercial banks. 
B) The Federal Reserve System guarantees the deposits in almost all banks up to a limit of $1,000,000 (extended to $2,500,000 through 2013) per account. 
C) Since the Federal Reserve System was established in 1913, bank failures due to panic withdrawals have been virtually eliminated. 
D) If a bank should fail, the FDIC guarantees that depositors can get their funds up to a limit of $100,000 (extended to $250,000 through 2103) per account.

Question 17

Which of the following would most likely reduce the number of bank failures?

Accepted Answer

A) an increase in the number of small banks 
B) tighter restrictions on interstate banking 
C) creating a system of deposit insurance 
D) encouraging banks to make more risky loans 
A) an increase in the number of small banks 
B) tighter restrictions on interstate banking 
C) creating a system of deposit insurance 
D) encouraging banks to make more risky loans

Question 18

Credit card balances are:

Accepted Answer

A) included in both M1 and M2. 
B) included in M1 but not M2. 
C) included in M2 but not M1. 
D) not included in either M1 or M2. 
A) included in both M1 and M2. 
B) included in M1 but not M2. 
C) included in M2 but not M1. 
D) not included in either M1 or M2.

Question 19

If a bank gets a $100,000 new deposit, chooses to lend out $85,000, and increases its excess reserves by $5,000 at the same time, then the reserve requirement is:

Accepted Answer

A) 10%. 
B) 15%. 
C) 20%. 
D) unable to be determined from the information given. 
A) 10%. 
B) 15%. 
C) 20%. 
D) unable to be determined from the information given.

Question 20

A change in the required reserve ratio changes:

Accepted Answer

A) the amount of actual reserves in the banking system. 
B) the amount of excess reserves in the banking system. 
C) the value of government securities held by the Fed. 
D) the level of insurance for banks who are members of the FDIC. 
E) none of the above. 
A) the amount of actual reserves in the banking system. 
B) the amount of excess reserves in the banking system. 
C) the value of government securities held by the Fed. 
D) the level of insurance for banks who are members of the FDIC. 
E) none of the above.

If the reserve requirement was 5% and a bank customer makes a deposit of $1,000, the initial result would be:

If a bank gets a $100,000 new deposit, chooses to lend out $75,000, and increases its excess reserves by $5,000 at the same time, then the reserve requirement is:

"Near monies" are:

If a bank has $1 million in demand deposits, $350,000 in reserves, and faces a 30 percent reserve requirement, the amount of money that a bank could directly create by loaning out their excess reserves is:

A bank receives a demand deposit of $5,000.The bank loans out $3,500 of this deposit and increases its excess reserves by $500.What is the required reserve ratio?

A reserve requirement of 40 percent would mean that each dollar of reserves could support ____ of demand deposits.

If the reserve requirement was 15% and a bank customer makes a deposit of $500, the initial result would be:

Which of the following is false?

A decrease in the excess reserves banks want to hold, together with people depositing currency into their demand deposit accounts, would:

The level of inflation in the early 1980s forced savings and loans to:

Credit cards should be included in M1 because they are just like checks.

Which of the following was a cause of the savings and loan crisis that occurred in the 1980s?

Which of the following changes would clearly increase the supply of money in the banking system?

Which of the following is true?

Which of the following would most likely reduce the number of bank failures?

Credit card balances are:

If a bank gets a $100,000 new deposit, chooses to lend out $85,000, and increases its excess reserves by $5,000 at the same time, then the reserve requirement is:

A change in the required reserve ratio changes:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

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Exam 15: Monetary Institutions

If the reserve requirement was 5% and a bank customer makes a deposit of $1,000, the initial result would be:

If a bank gets a $100,000 new deposit, chooses to lend out $75,000, and increases its excess reserves by $5,000 at the same time, then the reserve requirement is:

"Near monies" are:

If a bank has $1 million in demand deposits, $350,000 in reserves, and faces a 30 percent reserve requirement, the amount of money that a bank could directly create by loaning out their excess reserves is:

A bank receives a demand deposit of $5,000.The bank loans out $3,500 of this deposit and increases its excess reserves by $500.What is the required reserve ratio?

A reserve requirement of 40 percent would mean that each dollar of reserves could support ____ of demand deposits.

If the reserve requirement was 15% and a bank customer makes a deposit of $500, the initial result would be:

Which of the following is false?

A decrease in the excess reserves banks want to hold, together with people depositing currency into their demand deposit accounts, would:

The level of inflation in the early 1980s forced savings and loans to:

Credit cards should be included in M1 because they are just like checks.

Which of the following was a cause of the savings and loan crisis that occurred in the 1980s?

Which of the following changes would clearly increase the supply of money in the banking system?

Which of the following is true?

Which of the following would most likely reduce the number of bank failures?

Credit card balances are:

If a bank gets a $100,000 new deposit, chooses to lend out $85,000, and increases its excess reserves by $5,000 at the same time, then the reserve requirement is:

A change in the required reserve ratio changes:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters