Exam 15: Money Creation

Sharon sells a government security worth $4,600,000 to the Federal Reserve Bank of Kansas City. She then deposits the funds in her checking account at First Commerce Bank. Her checking account had a $150,000 balance before this deposit. The reserves of First Commerce Bank would:

Assume that the required reserve ratio is 5 percent. If a commercial bank has $2 million cash in its vault, $1 million in government securities, $3 million on deposit at the Fed, and $60 million in checkable deposits, then its excess reserves equal:

Requiring banks to use less leveraging is equivalent to:

Which of the following statements is correct?

When you deposit money at a bank, the bank will normally turn around and lend most of it to a borrower.

Refer to the table above. If a bank has checkable deposits of $45 million and reserves of $2 million, then its excess reserves are:

When a bank accepts a checkable deposit from a customer, its deposits will increase and its excess reserves will:

When a bank sells capital stock (equity shares) in return for cash:

Suppose that the reserve ratio is 6%, and applies only to checkable deposits. A bank has non-checkable time deposits of $300 million, checkable deposits of $100 million, and reserves of $8 million. What are the excess reserves of this bank?

Fractional reserve banking refers to a system where banks:

The commercial banking system can lend by a multiple of its excess reserves primarily because:

A bank has excess reserves of $5,000 and demand deposits of $50,000; the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, then this bank can lend a maximum of:

If a commercial banking system has $200,000 in checkable deposits and actual reserves of $70,000, then with a reserve ratio of 20 percent the banking system can expand the supply of money by a maximum of $180,000.

Answer the question based on the following balance sheet for the First National Bank. Assume the reserve ratio is 15 percent: Refer to the data above. If a check for $20,000 is drawn and cleared against this bank, it will then have excess reserves of:

When required reserves exceed actual reserves, commercial banks will be forced to have borrowers:

One major component of money supply M1 is part of a bank's:

Cash held by a bank in its vault is a part of the bank's:

When cash is deposited in a checkable-deposit account at a bank, there is:

Refer to the table above. If a bank has $60 million in savings deposits and $40 million in checkable deposits, then its required reserves are:

Money is "created" when: