ECON 423-3

Which of the following statements are true? A) Checkable deposits are payable on demand. B) Checkable deposits do not include NOW accounts. C) Checkable deposits are the primary source of bank funds. D) Demand deposits are checkable deposits that pay interest.

A) Checkable deposits are payable on demand.

When a depositor opens a checking account at the First National Bank, the bank's assets ________ and its liabilities ________. A) increase; increase B) do not change; decrease C) do not change; increase D) decrease; decrease

A) increase; increase

When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the bank chooses NOT to make any loans but to hold excess reserves instead, then, in the bank's final balance sheet, A) the assets at the bank increase by $1 million. B) the liabilities of the bank decrease by $1 million. C) reserves increase by $200,000. D) liabilities increase by $200,000.

A) the assets at the bank increase by $1 million.

Which of the following are commercial bank assets? A) the building owned by the bank B) a discount loan C) a negotiable CD D) a customer's checking account

A) the building owned by the bank

Bank loans from the Federal Reserve are called ________ and represent a ________ of funds for commercial banks. A) discount loans; use B) discount loans; source C) fed funds; use D) fed funds; source

B) discount loans; source

Bank capital is listed on the ________ side of the bank's balance sheet because it represents a ________ of funds. A) liability; use B) liability; source C) asset; use D) asset; source

B) liability; source

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank, then A) the liabilities of the First National Bank increase by $10. B) the assets/liabilities of the First National Bank decrease by $10. C) the liabilities of Citibank decrease by $10. D) the assets of Citibank decrease by $10.

B) the assets/liabilities of the First National Bank decrease by $10.

Bank's make their profits primarily by issuing A) equity. B) negotiable CDs. C) loans. D) bonds.

C) loans.

If, after a deposit outflow, a bank needs an additional $3 million to meet its reserve requirements, the bank can A) reduce deposits by $3 million. B) increase loans by $3 million. C) sell $3 million of securities. D) repay its discount loans from the Fed.

C) sell $3 million of securities

Which of the following statements is false? A) A bank's assets are its uses of funds. B) A bank issues liabilities to acquire funds. C) The bank's assets provide the bank with income. D) Bank capital is recorded as an asset on the bank balance sheet

D) Bank capital is recorded as an asset on the bank balance sheet

Bank capital is NOT listed on the ________ side of the bank's balance sheet because it represents a ________ of funds. A) liability; use B) liability; source C) asset; use D) asset; source

D) asset; source

When a depositor closes a checking account at the First National Bank, the bank's assets ________ and its liabilities ________. A) increase; increase B) do not change; decrease C) do not change; increase D) decrease; decrease

D) decrease; decrease

Banks may borrow from or lend to another bank in the Federal Funds market. A loan of excess reserves from one bank to another bank is recorded as a(n) ________ for the borrowing bank and a(n) ________ for the lending bank. A) asset; asset B) asset; liability C) liability; liability D) liability; asset

D) liability; asset

Please, show your work in the box below. Suppose $100,000 is deposited at a bank. The required reserve ratio is 5%, and the bank chooses to hold $1,000 extra in excess reserves. What are the bank's total reserves? a. $6,000 b. $0 c. $16,000 d. $5,000

a. $6,000

Please, show your work. Suppose $100,000 is deposited at a bank. The required reserve ratio is 5%, and the bank chooses to hold $2,000 extra in excess reserves. What are the bank's total reserves? a. $0 b. $5,000 c. $6,000 d. $7,000

d. $7,000