Exam 15: Banking and the Money Supply

In commercial banking operations,there is a tradeoff between liquidity and profitability.

Which of the following is not true of Federal Reserve notes?

The immediate effect of a bank's purchase of U.S.government securities from the Fed is a(n)

If a bank has $1 million in assets and $50,000 in net worth,its liabilities must equal

Liquidity refers to the ease with which an asset can be converted into the medium of exchange without a significant loss of value.The least liquid of the assets below is

On a bank's balance sheet,

Currently,M2 is approximately

When the Fed buys U.S.government securities from a bank,that bank's excess reserves and required reserves increase but total reserves decrease.

Banks want to minimize their holdings of excess reserves because

Banks are permitted to lend all of their required reserves.

Which of the following is not legal tender in the United States?

A bank manager who wants to increase profitability would likely

Of the following,which is not included in the narrowest definition of money,M1

Usually,a commercial bank's depositors and its owners are the same individuals.

Which of the following is true of credit cards?

If a bank receives $1,000 in currency as a new deposit,its ability to make loans increases by $1,000.

The appropriate open market operation for reducing the money supply is

The practice of reducing risk through diversification could be summed up by the phrase

Suppose the reserve requirement ratio is 10 percent.Assuming no bank holds excess reserves and nobody withdraws cash,a $100,000 reduction of excess reserves by the Fed can eventually

The majority of the Fed's liabilities are