Exam 15: Banking and the Money Supply

The Fed relies primarily on the discount rate to control the money supply.

If a bank sells a $1,000 security to the Fed and the required reserve ratio is 20 percent,

If a bank receives $2,500 of reserves by selling a government bond to the Fed,its ability to make loans increases by $2,500.

If a bank calls in a loan to replenish its reserves,

The simple money multiplier equals

Suppose that the First National Bank acquires $500,000 in new deposits and the required reserve ratio is 12 percent.Which of the following is true?

The higher the required reserve ratio,

If the Fed buys U.S.government securities from a bank and credits the bank's reserve account,

The world's largest source of bogus American currency is

Suppose that a bank has $100 million in checkable deposits and the required reserve ratio is 0.1.Required reserves are

M2 is defined as

An increase in banks' desire for liquidity will

Banks earn a profit on the difference between

Suppose you bank at Bank A and you write a check to your friend,who banks at Bank B.What happens after the check clears?

If the Fed wishes to reduce the money supply,it can sell U.S.government securities to member banks.

In banking,Assets equal Liabilities plus Net Worth.

Banks create money when they make loans.

In banking,Assets minus Net Worth equals Liabilities.

If each bank in the United States had to keep 100 percent of checkable deposits as reserves,each $1 the Fed injected into new reserves could increase the money supply by as much as

Suppose a commercial bank's reserves increase by $3,000 and the bank,which holds no excess reserves,makes a loan of $2,400.What is the required reserve ratio?