Question 1

Bank A has checkable deposits of $100 million, vault cash equaling $1 million and deposits at the Fed equaling $14 million.If the required reserve rate is ten percent what is the maximum amount Bank A could lend?

Accepted Answer

A) $85 million 
B) $15 million 
C) $14 million 
D) $5 million

Question 2

When a business purchases a $50,000 computer system by writing a check, the business's balance sheet will:

Accepted Answer

A) only show an increase in liabilities of $50,000. 
B) show an increase in assets and liabilities for $50,000. 
C) not reflect any increase in assets or liabilities, only a change in the composition of assets. 
D) only show an increase in assets of $50,000.

Question 3

Assume that the required reserve rate is ten percent, banks want to hold excess reserves in an amount that equals three percent of deposits, and the public withdraws ten percent of every deposit in cash.An open market purchase of $1 million by the Fed will see banking system deposits increase by:

Accepted Answer

A) more than $1 million but less than $10 million. 
B) exactly $1 million. 
C) less than $1 million. 
D) more than $10 million but less than $20 million.

Question 4

When an individual withdraws funds from a checking account the:

Accepted Answer

A) bank's balance sheet shrinks but the size of the Fed's balance sheet is not affected. 
B) bank's balance sheet shrinks and so does the Fed's balance sheet. 
C) bank's balance sheet shrinks but the size of the Fed's balance sheet increases. 
D) size of the bank's balance sheet stays the same but the size of the Fed's balance sheet shrinks.

Question 5

Over the two-year period during which the financial crisis occurred, the amount of assets in the Federal Reserve balance sheet increased by:

Accepted Answer

A) 2.5 times. 
B) 3 times. 
C) 4.5 times. 
D) 6 times.

Question 6

A central bank's sale of securities from its portfolio will:

Accepted Answer

A) decrease the size of its balance sheet. 
B) have no impact at all on the balance sheet. 
C) only change the composition of its liabilities. 
D) only change the composition of its assets.

Question 7

Reserves are:

Accepted Answer

A) assets of the central bank and liabilities of the commercial bank. 
B) assets of the commercial banks and liabilities of the central bank. 
C) liabilities of the commercial and central banks. 
D) assets and liabilities for the central bank.

Question 8

The simple deposit expansion multiplier is really too simple for understanding the link between changes in a central bank's balance sheet and the quantity of money in the economy because it:

Accepted Answer

A) ignores how central banks could change their balance sheet. 
B) assumes banks hold excess reserves. 
C) ignores the fact people might change their currency holdings. 
D) ignores changes in vault cash.

Question 9

During the 2007-2009 financial crisis which of the following became the largest component of assets on the Fed's balance sheet:

Accepted Answer

A) foreign exchange reserves. 
B) loans. 
C) U.S.Treasury securities. 
D) mortgage backed securities.

Question 10

If required reserves are expressed by RR; the required reserve rate by rD and deposits by D, the simple deposit expansion multiplier is expressed as:

Accepted Answer

A) RDD. 
B) (1/r
D) D 
C) RD. 
D) 1/rD.

Question 11

Follow a $1 billion purchase of U.S.Treasury bonds by the Fed from commercial banks.Discuss the changes that occur to the balance sheet of the banking system and the balance sheet of the Fed.

Accepted Answer

The answer of Follow a $1 billion purchase of U.S.Treasury...

Question 12

What was the main reason the Fed stopped announcing growth targets for money aggregates in the early 2000s?

Accepted Answer

The answer of What was the main reason the Fed...

Question 13

The monetary base is the sum of:

Accepted Answer

A) reserves and currency in the hands of the public. 
B) reserves and M2. 
C) currency in the hands of the public and M2. 
D) currency in the hands of the public M1.

Question 14

What would be the amount of deposits D, given that the monetary base MB = $750 billion, the required reserve rate (r_D) = 0.1, the excess reserve rate (ER/D) = 0.005, and non-bank currency to deposits (C/D) equaled 1.2?

Accepted Answer

The answer of What would be the amount of deposits...

Question 15

Monetary policy operations for central banks are run through changes in the liability category of:

Accepted Answer

A) government's accounts. 
B) currency. 
C) reserves. 
D) gold.

Question 16

Each of the following items would appear as assets on the central bank's balance sheet, except:

Accepted Answer

A) loans. 
B) securities. 
C) currency. 
D) foreign exchange reserves.

Question 17

The use of deposit sweeping allows banks to:

Accepted Answer

A) pay higher rates of interest than are allowed by law. 
B) reduce the amount of required reserves they must hold. 
C) pay less for FDIC insurance. 
D) weed out less profitable deposits.

Question 18

A liability of the central bank in functioning as the bankers' bank is:

Accepted Answer

A) accounts of commercial banks. 
B) securities. 
C) loans. 
D) currency.

Question 19

If the central banks of most countries do not set the exchange rates, why do they hold foreign exchange as one of their assets?

Accepted Answer

The answer of If the central banks of most countries...

Question 20

A central bank's balance sheet would categorize each of the following as liabilities, except:

Accepted Answer

A) currency. 
B) loans. 
C) the government's account. 
D) accounts of the commercial banks.

Exam 17: The Central Bank Balance Sheet and the Money Supply Process

Bank A has checkable deposits of $100 million, vault cash equaling $1 million and deposits at the Fed equaling $14 million.If the required reserve rate is ten percent what is the maximum amount Bank A could lend?

When a business purchases a $50,000 computer system by writing a check, the business's balance sheet will:

Assume that the required reserve rate is ten percent, banks want to hold excess reserves in an amount that equals three percent of deposits, and the public withdraws ten percent of every deposit in cash.An open market purchase of $1 million by the Fed will see banking system deposits increase by:

When an individual withdraws funds from a checking account the:

Over the two-year period during which the financial crisis occurred, the amount of assets in the Federal Reserve balance sheet increased by:

A central bank's sale of securities from its portfolio will:

Reserves are:

The simple deposit expansion multiplier is really too simple for understanding the link between changes in a central bank's balance sheet and the quantity of money in the economy because it:

During the 2007-2009 financial crisis which of the following became the largest component of assets on the Fed's balance sheet:

If required reserves are expressed by RR; the required reserve rate by r_D and deposits by D, the simple deposit expansion multiplier is expressed as:

Follow a $1 billion purchase of U.S.Treasury bonds by the Fed from commercial banks.Discuss the changes that occur to the balance sheet of the banking system and the balance sheet of the Fed.

What was the main reason the Fed stopped announcing growth targets for money aggregates in the early 2000s?

The monetary base is the sum of:

What would be the amount of deposits D, given that the monetary base MB = $750 billion, the required reserve rate (r_D) = 0.1, the excess reserve rate (ER/D) = 0.005, and non-bank currency to deposits (C/D) equaled 1.2?

Monetary policy operations for central banks are run through changes in the liability category of:

Each of the following items would appear as assets on the central bank's balance sheet, except:

The use of deposit sweeping allows banks to:

A liability of the central bank in functioning as the bankers' bank is:

If the central banks of most countries do not set the exchange rates, why do they hold foreign exchange as one of their assets?

A central bank's balance sheet would categorize each of the following as liabilities, except:

Exam 17: The Central Bank Balance Sheet and the Money Supply Process

Bank A has checkable deposits of $100 million, vault cash equaling $1 million and deposits at the Fed equaling $14 million.If the required reserve rate is ten percent what is the maximum amount Bank A could lend?

When a business purchases a $50,000 computer system by writing a check, the business's balance sheet will:

Assume that the required reserve rate is ten percent, banks want to hold excess reserves in an amount that equals three percent of deposits, and the public withdraws ten percent of every deposit in cash.An open market purchase of $1 million by the Fed will see banking system deposits increase by:

When an individual withdraws funds from a checking account the:

Over the two-year period during which the financial crisis occurred, the amount of assets in the Federal Reserve balance sheet increased by:

A central bank's sale of securities from its portfolio will:

Reserves are:

The simple deposit expansion multiplier is really too simple for understanding the link between changes in a central bank's balance sheet and the quantity of money in the economy because it:

During the 2007-2009 financial crisis which of the following became the largest component of assets on the Fed's balance sheet:

If required reserves are expressed by RR; the required reserve rate by rD and deposits by D, the simple deposit expansion multiplier is expressed as:

Follow a $1 billion purchase of U.S.Treasury bonds by the Fed from commercial banks.Discuss the changes that occur to the balance sheet of the banking system and the balance sheet of the Fed.

What was the main reason the Fed stopped announcing growth targets for money aggregates in the early 2000s?

The monetary base is the sum of:

What would be the amount of deposits D, given that the monetary base MB = $750 billion, the required reserve rate (rD) = 0.1, the excess reserve rate (ER/D) = 0.005, and non-bank currency to deposits (C/D) equaled 1.2?

Monetary policy operations for central banks are run through changes in the liability category of:

Each of the following items would appear as assets on the central bank's balance sheet, except:

The use of deposit sweeping allows banks to:

A liability of the central bank in functioning as the bankers' bank is:

If the central banks of most countries do not set the exchange rates, why do they hold foreign exchange as one of their assets?

A central bank's balance sheet would categorize each of the following as liabilities, except:

If required reserves are expressed by RR; the required reserve rate by r_D and deposits by D, the simple deposit expansion multiplier is expressed as:

What would be the amount of deposits D, given that the monetary base MB = $750 billion, the required reserve rate (r_D) = 0.1, the excess reserve rate (ER/D) = 0.005, and non-bank currency to deposits (C/D) equaled 1.2?