Question 1

Assume that the reserve requirement is 10 percent.A $1, 000 cash deposit into a savings account will immediately increase the bank's required reserves by _____.

Accepted Answer

A) $10, 000. 
B) $500. 
C) $100. 
D) $1, 500. 
E) $10. 
A) $10, 000. 
B) $500. 
C) $100. 
D) $1, 500. 
E) $10.

Question 2

If the reserve requirement is 33.3 percent, what is the approximate value of deposit expansion multiplier?

Accepted Answer

A) 3.33 
B) 3 
C) 0.33 
D) 0.667 
E) 1.5 
A) 3.33 
B) 3 
C) 0.33 
D) 0.667 
E) 1.5

Question 3

The balance sheet of a depository institution lists:

Accepted Answer

A) loans to private individuals as assets. 
B) excess reserves as liabilities. 
C) checkable deposits as liabilities. 
D) required reserves as liabilities. 
E) loans from the central bank as assets. 
A) loans to private individuals as assets. 
B) excess reserves as liabilities. 
C) checkable deposits as liabilities. 
D) required reserves as liabilities. 
E) loans from the central bank as assets.

Question 4

If a bank has $500 in excess reserves and the reserve requirement is 20 percent, then the maximum amount by which this individual bank can increase the money supply is _____.

Accepted Answer

A) $100 
B) $400 
C) $500 
D) $1, 000 
E) $2, 500 
A) $100 
B) $400 
C) $500 
D) $1, 000 
E) $2, 500

Question 5

Suppose Bank X is holding total cash reserves of $32, 000 on deposits of $90, 000.If the reserve requirement is 15 percent, then the excess reserves held by this bank is:

Accepted Answer

A) $27, 200. 
B) $58, 000. 
C) $4, 800. 
D) $13, 200. 
E) $18, 500. 
A) $27, 200. 
B) $58, 000. 
C) $4, 800. 
D) $13, 200. 
E) $18, 500.

Question 6

Which of the following is true of a certificate of deposit?

Accepted Answer

A) They are accounts at savings and loan associations. 
B) The funds in this deposit account are not given out in the form of loans. 
C) The funds in this account must be deposited for a specified period of time. 
D) The value of the deposit should be more than $100, 000. 
E) The deposits earn very little or no interest. 
A) They are accounts at savings and loan associations. 
B) The funds in this deposit account are not given out in the form of loans. 
C) The funds in this account must be deposited for a specified period of time. 
D) The value of the deposit should be more than $100, 000. 
E) The deposits earn very little or no interest.

Question 7

The table given below shows the components of money supply in an economy. Table 12.1
  Refer to Table 12.1 and calculate the value of M2.

Accepted Answer

A) $1, 145 
B) $1, 325 
C) $1, 750 
D) $2, 550 
E) $2, 815 
A) $1, 145 
B) $1, 325 
C) $1, 750 
D) $2, 550 
E) $2, 815

Question 8

Which of the following facilities give bank customers access to services over a much wider geographic area than any single bank's branches can cover?

Accepted Answer

A) Traveler's checks 
B) Saving account checks 
C) ATM networks 
D) Demand drafts 
E) Certificates of deposit 
A) Traveler's checks 
B) Saving account checks 
C) ATM networks 
D) Demand drafts 
E) Certificates of deposit

Question 9

The money-creating ability of the banking system may be lowered by:

Accepted Answer

A) a decrease in the cash balances that people wish to hold. 
B) a fall in the overall rate of inflation. 
C) an increase in the excess reserves. 
D) an increase in total deposits. 
E) an increase in the reserve requirement. 
A) a decrease in the cash balances that people wish to hold. 
B) a fall in the overall rate of inflation. 
C) an increase in the excess reserves. 
D) an increase in total deposits. 
E) an increase in the reserve requirement.

Question 10

If Julia deposits $2, 000 dollars (which she has until now kept in her closet as cash)in her savings account, then the M1 money supply will decrease.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following constitutes a currency drain from the banking system?

Accepted Answer

A) Purchases of government securities 
B) New demand deposits 
C) Banks lending out all excess reserves 
D) A banking panic that leads to large withdrawals from banks 
E) Lower required reserve holdings 
A) Purchases of government securities 
B) New demand deposits 
C) Banks lending out all excess reserves 
D) A banking panic that leads to large withdrawals from banks 
E) Lower required reserve holdings

Question 12

Suppose the National Bank has total cash reserves of $2, 000 and has $5, 000 in total deposits.If its total excess reserves are $1, 250, then the reserve requirement is equal to:

Accepted Answer

A) 25 percent. 
B) 15 percent. 
C) 10 percent. 
D) 5 percent. 
E) 20 percent. 
A) 25 percent. 
B) 15 percent. 
C) 10 percent. 
D) 5 percent. 
E) 20 percent.

Question 13

The U.S.dollar is a composite currency.

Accepted Answer

A) True 
 B)False

Question 14

Banks that operate under Islamic law are no longer considered intermediaries between borrowers and lenders because they are not allowed to charge interest.

Accepted Answer

A) True 
 B)False

Question 15

Commodity money is money that:

Accepted Answer

A) has no value as a commodity. 
B) is not backed by gold or silver and is not a legal tender. 
C) may go out of circulation with an increase in its intrinsic value. 
D) always has a face value greater than the intrinsic value. 
E) is solely used in barter exchanges. 
A) has no value as a commodity. 
B) is not backed by gold or silver and is not a legal tender. 
C) may go out of circulation with an increase in its intrinsic value. 
D) always has a face value greater than the intrinsic value. 
E) is solely used in barter exchanges.

Question 16

If the entire banking system has total deposits of $4 billion and a reserve requirement of 5 percent, then the maximum possible amount of loans that the banking system can make equals $2 million.

Accepted Answer

A) True 
 B)False

Question 17

The table given below shows the components of money supply in an economy. Table 12.1
  Refer to Table 12.1 and calculate the value of M1.

Accepted Answer

A) $550 million 
B) $570 million 
C) $780 million 
D) $1, 125 million 
E) $1, 145 million 
A) $550 million 
B) $570 million 
C) $780 million 
D) $1, 125 million 
E) $1, 145 million

Question 18

Which of the following is true of International Banking Facilities (IBFs)in the U.S.?

Accepted Answer

A) IBFs were legalized by the Federal Reserve Board in 1970. 
B) IBFs are bookkeeping systems set up in existing bank offices of the U.S.to record international banking transactions 
C) IBFs are "shell" bank branches of U.S.banks in the Caribbean. 
D) Loans extended by the IBFs are subject to reserve requirements and interest rate regulations. 
E) IBFs are allowed to extend loans to the residents and businesses of the United States and not to the nonresidents. 
A) IBFs were legalized by the Federal Reserve Board in 1970. 
B) IBFs are bookkeeping systems set up in existing bank offices of the U.S.to record international banking transactions 
C) IBFs are "shell" bank branches of U.S.banks in the Caribbean. 
D) Loans extended by the IBFs are subject to reserve requirements and interest rate regulations. 
E) IBFs are allowed to extend loans to the residents and businesses of the United States and not to the nonresidents.

Question 19

An increase in the amount of currency held by the public will raise the value of the deposit expansion multiplier.

Accepted Answer

A) True 
 B)False

Question 20

If a banking system receives an initial deposit of $150, 000 and the reserve requirement is 40 percent, the total deposit in the banking system (including the initial deposit)can be expanded by _____.

Accepted Answer

A) $375, 000 
B) $150, 000 
C) $60, 000 
D) $250, 000 
E) $450, 000 
A) $375, 000 
B) $150, 000 
C) $60, 000 
D) $250, 000 
E) $450, 000

Exam 10: Money and Banking

Assume that the reserve requirement is 10 percent.A $1, 000 cash deposit into a savings account will immediately increase the bank's required reserves by _____.

If the reserve requirement is 33.3 percent, what is the approximate value of deposit expansion multiplier?

The balance sheet of a depository institution lists:

If a bank has $500 in excess reserves and the reserve requirement is 20 percent, then the maximum amount by which this individual bank can increase the money supply is _____.

Suppose Bank X is holding total cash reserves of $32, 000 on deposits of $90, 000.If the reserve requirement is 15 percent, then the excess reserves held by this bank is:

Which of the following is true of a certificate of deposit?

The table given below shows the components of money supply in an economy. Table 12.1 Refer to Table 12.1 and calculate the value of M2.

Which of the following facilities give bank customers access to services over a much wider geographic area than any single bank's branches can cover?

The money-creating ability of the banking system may be lowered by:

If Julia deposits $2, 000 dollars (which she has until now kept in her closet as cash)in her savings account, then the M1 money supply will decrease.

Which of the following constitutes a currency drain from the banking system?

Suppose the National Bank has total cash reserves of $2, 000 and has $5, 000 in total deposits.If its total excess reserves are $1, 250, then the reserve requirement is equal to:

The U.S.dollar is a composite currency.

Banks that operate under Islamic law are no longer considered intermediaries between borrowers and lenders because they are not allowed to charge interest.

Commodity money is money that:

If the entire banking system has total deposits of $4 billion and a reserve requirement of 5 percent, then the maximum possible amount of loans that the banking system can make equals $2 million.

The table given below shows the components of money supply in an economy. Table 12.1 Refer to Table 12.1 and calculate the value of M1.

Which of the following is true of International Banking Facilities (IBFs)in the U.S.?

An increase in the amount of currency held by the public will raise the value of the deposit expansion multiplier.

If a banking system receives an initial deposit of $150, 000 and the reserve requirement is 40 percent, the total deposit in the banking system (including the initial deposit)can be expanded by _____.

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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