Question 1

A bank can lend out its excess reserves but not its required reserves.

Accepted Answer

A) True 
 B)False

Question 2

Reserves of member banks appear on the Fed's balance sheet as liabilities.

Accepted Answer

A) True 
 B)False

Question 3

The interest rate which the Fed charges banks that borrow reserves from it is the:

Accepted Answer

A)   federal funds rate.
B)   discount rate.
C)   reserved rate.
D)   investment rate.
E)   check rate

Question 4

An open-market purchase by the Federal Reserve withdraws excess reserves from the banking system and causes the money supply to contract.

Accepted Answer

A) True 
 B)False

Question 5

A bank faces a required reserve ratio of 5 percent.If the bank has $200 million of checkable deposits and $15 million of total reserves,then how large are the bank's excess reserves?

Accepted Answer

A)   $0.
B)   $5 million.
C)   $10 million.
D)   $15 million.

Question 6

The required reserve ratio is the:

Accepted Answer

A)   actual amount of reserves that banks must hold.
B)   excess amount of reserves that a bank must hold.
C)   minimum amount of reserves the Fed requires a bank to hold.
D)   total amount of reserves that banks hold at all times.
E)   maximum amount of reserves that banks can hold to remain liquid.

Question 7

Discuss how a single bank creates money.What is the limit to which a single bank can add to the money supply? By how much can an entire banking system add to the money supply?

Accepted Answer

A single bank is limited in its money cr...

Question 8

The federal funds rate is:

Accepted Answer

A)   the minimum amount of reserves the Fed requires a bank to hold.
B)   the interest rate that the Fed charges banks who borrow from it.
C)   the interest rate on loans made by banks to other banks
D)   the maximum percentage of the cost of a stock that can be borrowed from a bank, with the stock offered as collateral.
E)   an appeal by the Fed to banks, asking for voluntary compliance with the Fed's wishes.

Question 9

Which of the following would not appear on the asset side of a commercial bank balance sheet?

Accepted Answer

A)   Reserves.
B)   Checkable deposits.
C)   Loans.
D)   Securities.

Question 10

The Fed's power to set the required reserves of commercial banks:

Accepted Answer

A)   provides a certain source of interest income for commercial banks.
B)   allows the Fed to control the lending ability of commercial banks and, thereby, control the money supply.
C)   prevents banks from hoarding too much vault cash.
D)   prevents commercial banks from earning excess profits.

Question 11

The required reserves of a bank are determined by multiplying the bank's checkable deposits by the required reserve ratio.

Accepted Answer

A) True 
 B)False

Question 12

Decisions regarding purchases and sales of government securities by the Fed are made by the:

Accepted Answer

A)   Federal Deposit Insurance Commission (FDI
C)  .
B)   Discount Committee (D
C)  .
C)   Federal Open Market Committee (FOM
C)  .
D)   Federal Funds Committee (FF
C)  .

Question 13

The Fed's countercyclical policy during expansion and prosperity includes:

Accepted Answer

A)   raising the required reserve ratio, raising the discount rate, and selling government bonds on the open market.
B)   raising the required reserve ratio, raising the discount rate, and buying government bonds on the open market.
C)   raising the required reserve ratio, cutting the discount rate, and selling government bonds on the open market.
D)   raising the required reserve ratio, cutting the discount rate, and buying government bonds on the open market.
E)   lowering the required reserve ratio, cutting discount rates, and buying government bonds on the open market.

Question 14

Exhibit 19-7 Lower Walloon National Bank
 
-In Exhibit 19-7,if Lower Walloon National bank loans out all of its excess reserves to James Brown so that Mr.Brown can upgrade his restaurant,and the money is put into Mr.Brown's account at the Lower Walloon National bank,then the bank will have reserves of:

Accepted Answer

A)   $10,000, loans of $8,000, and checkable deposits of $18,000.
B)   $2,000, loans of $4,000, and checkable deposits of $14,000.
C)   $6,000, loans of $4,000, and checkable deposits of $10,000.
D)   $10,000, loans of $8,000, and checkable deposits of $10,000.
E)   $0, loans of $8,000, and checkable deposits of $18,000.

Question 15

The required reserve ratio is required reserves stated as a percentage of checkable deposits.

Accepted Answer

A) True 
 B)False

Question 16

If your bank receives a checkable deposit of $20,000,and the banking system makes loans totaling $180,000,the maximum possible,then the required reserve ratio must be:

Accepted Answer

A)   0.10.
B)   0.20.
C)   0.25.
D)   0.40.
E)   0.50.

Question 17

The market in which banks make loans of reserves for terms of over one year is called the federal funds market.

Accepted Answer

A) True 
 B)False

Question 18

If a bank that is subject to a 10 percent required reserve ratio has $20,000 in excess reserves,it can make new loans of:

Accepted Answer

A)   $2,000.
B)   $18,000.
C)   $20,000.
D)   $200,000.

Question 19

Best National Bank is subject to a 10 percent required reserve ratio.If this bank received a new checkable deposit of $1,000,it could make new loans of:

Accepted Answer

A)   $100.
B)   $900.
C)   $1,000.
D)   $10,000.

Question 20

The percentage of checkable deposits that banks and other financial intermediaries are required to keep in cash reserves is known as:

Accepted Answer

A)   the fractional reserve requirement.
B)   the excess reserve requirement.
C)   the required reserve ratio.
D)   the discount rate.
E)   M1.

Exam 19: Money Creation

The interest rate which the Fed charges banks that borrow reserves from it is the:

Correct Answer
verified

Decisions regarding purchases and sales of government securities by the Fed are made by the:

Correct Answer
verified

An open-market purchase by the Federal Reserve withdraws excess reserves from the banking system and causes the money supply to contract.

Correct Answer
verified

The percentage of checkable deposits that banks and other financial intermediaries are required to keep in cash reserves is known as:

Correct Answer
verified

The Fed's power to set the required reserves of commercial banks:

Correct Answer
verified

The market in which banks make loans of reserves for terms of over one year is called the federal funds market.

Correct Answer
verified

If your bank receives a checkable deposit of $20,000,and the banking system makes loans totaling $180,000,the maximum possible,then the required reserve ratio must be:

Correct Answer
verified

A bank can lend out its excess reserves but not its required reserves.

Correct Answer
verified

Which of the following would not appear on the asset side of a commercial bank balance sheet?

Correct Answer
verified

Discuss how a single bank creates money.What is the limit to which a single bank can add to the money supply? By how much can an entire banking system add to the money supply?

Correct Answer
verified
A single bank is limited in its money cr...
View Answer

The Fed's countercyclical policy during expansion and prosperity includes:

Correct Answer
verified

A bank faces a required reserve ratio of 5 percent.If the bank has $200 million of checkable deposits and $15 million of total reserves,then how large are the bank's excess reserves?

Correct Answer
verified

If a bank that is subject to a 10 percent required reserve ratio has $20,000 in excess reserves,it can make new loans of:

Correct Answer
verified

The required reserve ratio is the:

Correct Answer
verified

The required reserves of a bank are determined by multiplying the bank's checkable deposits by the required reserve ratio.

Correct Answer
verified

Best National Bank is subject to a 10 percent required reserve ratio.If this bank received a new checkable deposit of $1,000,it could make new loans of:

Correct Answer
verified

The required reserve ratio is required reserves stated as a percentage of checkable deposits.

Correct Answer
verified

Reserves of member banks appear on the Fed's balance sheet as liabilities.

Correct Answer
verified

The federal funds rate is:

Correct Answer
verified

Correct Answer
verified

Exam 19: Money Creation

The interest rate which the Fed charges banks that borrow reserves from it is the:

Correct AnswerverifiedShow Answer

Decisions regarding purchases and sales of government securities by the Fed are made by the:

Correct AnswerverifiedShow Answer

An open-market purchase by the Federal Reserve withdraws excess reserves from the banking system and causes the money supply to contract.

Correct AnswerverifiedShow Answer

The percentage of checkable deposits that banks and other financial intermediaries are required to keep in cash reserves is known as:

Correct AnswerverifiedShow Answer

The Fed's power to set the required reserves of commercial banks:

Correct AnswerverifiedShow Answer

The market in which banks make loans of reserves for terms of over one year is called the federal funds market.

Correct AnswerverifiedShow Answer

If your bank receives a checkable deposit of $20,000,and the banking system makes loans totaling $180,000,the maximum possible,then the required reserve ratio must be:

Correct AnswerverifiedShow Answer

A bank can lend out its excess reserves but not its required reserves.

Correct AnswerverifiedShow Answer

Which of the following would not appear on the asset side of a commercial bank balance sheet?

Correct AnswerverifiedShow Answer

Discuss how a single bank creates money.What is the limit to which a single bank can add to the money supply? By how much can an entire banking system add to the money supply?

Correct AnswerverifiedA single bank is limited in its money cr...View AnswerShow Answer

The Fed's countercyclical policy during expansion and prosperity includes:

Correct AnswerverifiedShow Answer

A bank faces a required reserve ratio of 5 percent.If the bank has $200 million of checkable deposits and $15 million of total reserves,then how large are the bank's excess reserves?

Correct AnswerverifiedShow Answer

If a bank that is subject to a 10 percent required reserve ratio has $20,000 in excess reserves,it can make new loans of:

Correct AnswerverifiedShow Answer

The required reserve ratio is the:

Correct AnswerverifiedShow Answer

The required reserves of a bank are determined by multiplying the bank's checkable deposits by the required reserve ratio.

Correct AnswerverifiedShow Answer

Best National Bank is subject to a 10 percent required reserve ratio.If this bank received a new checkable deposit of $1,000,it could make new loans of:

Correct AnswerverifiedShow Answer

The required reserve ratio is required reserves stated as a percentage of checkable deposits.

Correct AnswerverifiedShow Answer

Reserves of member banks appear on the Fed's balance sheet as liabilities.

Correct AnswerverifiedShow Answer

The federal funds rate is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
A single bank is limited in its money cr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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