Chapter 15 MACRO

Use the following balance sheet for the ABC National Bank in answering the next question(s). Assume the required reserve ratio is 20 percent. Refer to the above data. This bank can safely expand its loans by a maximum of:

$5,000

If the reserve ratio is 100 percent, the value of the monetary multiplier is:

1

Commercial banks create money when they:

create checkable deposits in exchange for IOUs

Which one of the following is presently a major deterrent to bank panics in the United States?

deposit insurance

The amount of reserves that a commercial bank is required to hold is equal to:

its checkable deposits multiplied by the reserve requirement

Answer the next question(s) on the basis of the following information for the Moolah Bank. Assumer that the listed amounts constitute this bank's complete set of accounts. Moolah's:

liabilities are $1000

A bank that has assets of $85 billion and a net worth of $10 billion must have

liabilities of $75 billion

If m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio, then for the banking system:

m=1/R

Answer the next question(s) on the basis of the following table for a commercial bank or thrift: Refer to the above table. When the legal reserve ratio is 30 percent, the monetary multiplier is:

$0

Answer the next questions on the basis of the following table for a commercial bank or thrift. Refer to row 2 in the above table. The number appropriate for space X is:

$100,000

Suppose the ABC bank has excess reserves of $4,000 and outstanding checkable deposits of $80,000. If the reserve requirement is 25 percent, what is the size of the bank's actual reserves?

$24,000

Refer to the above data. If the original balance sheet was for the commercial banking system, rather than a single bank, loans and checkable deposits could have been expanded by a maximum of:

$25,000

Refer to the above table. When the legal reserve ratio is 30 percent, the monetary multiplier is:

3.33

Which of the following describes the identity embodied in a balance sheet?

Assets equal liabilities plus net worth

When a check is drawn and cleared, the

bank against which the check is cleared loses reserves and deposits equal to the amount of the check

The goldsmith's ability to create money . was based on the fact that:

paper money in the form of gold receipts was rarely redeemed for gold