Question 1

If people never withdraw cash from banks and there are no required reserves,how much money can the banking system potentially create for a given amount of new deposits?

Accepted Answer

A)  None.
B)  The same amount as the new deposits.
C)  The amount of new deposits multiplied by the reserve ratio.
D)  An infinite amount of money.E) A) and D)
F) B) and C)

Question 2

Banks make loans to which of the following?

Accepted Answer

A)  Businesses for new plants and equipment.
B)  Consumers for new homes and cars.
C)  The government for its projects.
D)  All of the choices are correct.E) A) and B)
F) C) and D)

Question 3

Savings accounts are included in

Accepted Answer

A)  M1 only.
B)  M2 only.
C)  M1 and M2.
D)  None of the choices are correct.E) A) and C)
F) B) and C)

Question 4

Which of the following reflects the concept of fractional reserves?

Accepted Answer

A)  The money multiplier is greater than 1.
B)  Excess reserves are equal to 0.
C)  Required reserves are equal to total reserves.
D)  Banks can lend only their required reserves.E) A) and D)
F) All of the above

Question 5

Which of the following insures deposits at banks?

Accepted Answer

A)  The Federal Reserve.
B)  The RTC.
C)  The FDIC.
D)  The FSLIC.E) B) and C)
F) A) and D)

Question 6

Each bank may lend money greater than its excess reserves.
Each bank may lend an amount equal to its excess reserves and no more.

Accepted Answer

A) True 
 B)False

Question 7

One of the main functions of banks is

Accepted Answer

A)  Borrowing money and lending to savers.
B)  Creating money.
C)  Ownership of projects in which they invest.
D)  Maintaining a constant money supply.E) B) and D)
F) A) and B)

Question 8

Suppose a bank has $300,000 in deposits and a required reserve ratio of 15 percent.Then required reserves are

Accepted Answer

A)  $4,500.
B)  $45,000.
C)  $255,000.
D)  $300,000.E) All of the above
F) B) and C)

Question 9

Excess reserves are

Accepted Answer

A)  Total reserves less required reserves.
B)  Total reserves less transactions account balances.
C)  Required reserves less demand deposits.
D)  Bank reserves in excess of vault cash.E) B) and D)
F) A) and B)

Question 10

Which of the following is included in M1?

Accepted Answer

A)  Currency in circulation.
B)  Currency in a bank's vault.
C)  Credit card balances.
D)  All of the choices are correct.E) A) and D)
F) None of the above

Question 11

Currency in circulation is included in

Accepted Answer

A)  M1 only.
B)  M2 only.
C)  Both M1 and M2.
D)  None of the choices are correct.E) A) and B)
F) A) and C)

Question 12

Suppose a banking system has a required reserve ratio of 0.15.How much can the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system?

Accepted Answer

A)  $1 billion.
B)  $150 million.
C)  $15 billion.
D)  $6.67 billion.E) A) and B)
F) B) and D)

Exam 13: Money and Banks

If people never withdraw cash from banks and there are no required reserves,how much money can the banking system potentially create for a given amount of new deposits?

Correct Answer
verified

Excess reserves are

Correct Answer
verified

Which of the following reflects the concept of fractional reserves?

Correct Answer
verified

Suppose a banking system has a required reserve ratio of 0.15.How much can the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system?

Correct Answer
verified

Savings accounts are included in

Correct Answer
verified

One of the main functions of banks is

Correct Answer
verified

Banks make loans to which of the following?

Correct Answer
verified

Each bank may lend money greater than its excess reserves. Each bank may lend an amount equal to its excess reserves and no more.

Correct Answer
verified

Which of the following insures deposits at banks?

Correct Answer
verified

Currency in circulation is included in

Correct Answer
verified

Suppose a bank has $300,000 in deposits and a required reserve ratio of 15 percent.Then required reserves are

Correct Answer
verified

Which of the following is included in M1?

Correct Answer
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Exam 13: Money and Banks

If people never withdraw cash from banks and there are no required reserves,how much money can the banking system potentially create for a given amount of new deposits?

Correct AnswerverifiedShow Answer

Excess reserves are

Correct AnswerverifiedShow Answer

Which of the following reflects the concept of fractional reserves?

Correct AnswerverifiedShow Answer

Suppose a banking system has a required reserve ratio of 0.15.How much can the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system?

Correct AnswerverifiedShow Answer

Savings accounts are included in

Correct AnswerverifiedShow Answer

One of the main functions of banks is

Correct AnswerverifiedShow Answer

Banks make loans to which of the following?

Correct AnswerverifiedShow Answer

Each bank may lend money greater than its excess reserves. Each bank may lend an amount equal to its excess reserves and no more.

Correct AnswerverifiedShow Answer

Which of the following insures deposits at banks?

Correct AnswerverifiedShow Answer

Currency in circulation is included in

Correct AnswerverifiedShow Answer

Suppose a bank has $300,000 in deposits and a required reserve ratio of 15 percent.Then required reserves are

Correct AnswerverifiedShow Answer

Which of the following is included in M1?

Correct AnswerverifiedShow Answer

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