Macroeconomics exam 3: homework's 7+8

Answer the question on the basis of the following balance sheet for the First National Bank of Bunco. All figures are in millions. Assets: reserves $20 loans $25 securities $15 property $90 Liabilities + net worth: checkable deposits $100 stock shares $50 Refer to the data. If this bank has excess reserves of $6 million, the legal reserve ratio must be: 10 percent. 12 percent. 14 percent. 20 percent.

14 percent

The Federal Reserve System was created in: 1926. 1946. 1895. 1913.

1913

The paper money used in the United States is: national Bank Notes. treasury Notes. united States Notes. federal Reserve Notes.

federal reserve notes

In the U.S. economy, the money supply is controlled by the: U.S. Treasury. federal Reserve System. senate Committee on Banking and Finance. congress.

federal reserve system

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? $16,000. $84,000. $24,000. $20,000.

$24,000

A single commercial bank must meet a 25 percent reserve requirement. If the bank has no excess reserves initially and $5,000 of cash is deposited in the bank, it can increase its loans by a maximum of: $1,250. $120,000. $5,000. $3,750.

$3,750

Answer the question on the basis of the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All figures are in billions. Assets: reserves $51 loans $109 securities $100 property $10 Liabilities + net worth: checkable deposits $140 stock shares $130 Refer to the data. The maximum amount by which the commercial banking system can expand the supply of money by lending is: $30 billion. $23.1 billion. $27 billion. $15 billion.

$30 billion

Assume the Continental National Bank's balance statement is as follows: Assets: reserves $40,000 loans $25,000 securities $110,000 Liabilities + net worth checkable deposits $130,000 stock shares $45,000 Assuming a legal reserve ratio of 20 percent, how much in excess reserves would this bank have after a check for $10,000 was drawn and cleared against it? $3,000. $24,000. $6,000. $16,000.

$6,000

Suppose a commercial banking system has $100,000 of outstanding checkable deposits and actual reserves of $35,000. If the reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of: $122,000. $175,000. $300,000. $75,000.

$75,000

When a check is drawn and cleared, the: Reserves and deposits of both the bank against which the check is cleared and the bank receiving the check are unchanged by this transaction. Bank against which the check is cleared loses reserves and deposits equal to the amount of the check. Bank receiving the check loses reserves and deposits equal to the amount of the check. Bank against which the check is cleared acquires reserves and deposits equal to the amount of the check.

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

Which of the following is correct? required reserves minus actual reserves equal excess reserves. required reserves equal excess reserves minus actual reserves. required reserves equal actual reserves plus excess reserves. actual reserves minus required reserves equal excess reserves.

actual reserves minus required reserves equal excess reserves

Money functions as a store of value a unit of account a medium of exchange all of these

all of these

The seven members of the Board of Governors of the Federal Reserve System are: appointed by the president with the confirmation of the Senate. elected by Congress from a slate of nominees provided by the president. appointed by the Senate Finance Committee. appointed by the presidents of the 12 Federal Reserve Banks.

appointed by the president with the confirmation of the Senate

Commercial banks and thrift institutions: differ because thrifts cannot make loans. differ because thrifts cannot offer checkable deposits. have become less similar in recent years. have become increasingly similar in recent years.

have become increasingly similar in recent years

Which of the following statements best describes the 12 Federal Reserve Banks? They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S. Treasury securities. They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably profitable industry. They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare. They are privately owned and publicly controlled central banks whose basic goal is to earn profits for their owners.

they are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare

A reserve requirement of 20 percent means a bank must have $1,000 of reserves if its checkable deposits are: $100. $1,000. $5,000. $12,000.

$5,000

Answer the question on the basis of the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All figures are in billions. Assets: reserves $51 loans $109 securities $100 property $10 Liabilities + net worth: checkable deposits $140 stock shares $130 Refer to the data. The commercial banking system has excess reserves of: $9 billion. $7 billion. $6.1 billion. $5 billion.

$9 billion

The ABC Commercial Bank has $5,000 in excess reserves and the reserve ratio is 30 percent. This information is consistent with the bank having: $90,000 in outstanding loans and $35,000 in reserves. $90,000 in checkable deposit liabilities and $32,000 in reserves. $20,000 in checkable deposit liabilities and $10,000 in reserves. $90,000 in checkable deposit liabilities and $35,000 in reserves.

$90,000 in checkable deposit liabilities and $32,000 in reserves

If the reserve ratio is 100 percent, the value of the monetary multiplier is: 0. 1. 10. 100.

1

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the: M1 money supply will decline and the M2 money supply will remain unchanged. M1 and M2 money supplies will not change. M1 money supply will increase and the M2 money supply will remain unchanged. M1 and M2 money supplies will both decline.

M1 money supply will decline and the M2 money supply will remain unchanged

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as: a medium of exchange. a store of value. a unit of account. an economic investment.

a medium of exchange

If you are estimating your total expenses for school next semester, you are using money primarily as: a medium of exchange. a store of value. a unit of account. an economic investment.

a unit of account

Excess reserves refer to the: difference between a bank's vault cash and its reserves deposited at the Federal Reserve Bank. minimum amount of actual reserves a bank must keep on hand to back up its customers deposits. difference between actual reserves and loans. difference between actual reserves and required reserves.

difference between actual reserves and required reserves

Currency held in the vault of First National Bank is: counted as part of M1. counted as part of M2 but not M1. only counted as part of M1 if it was deposited into a checking account. not counted as part of the money supply.

not counted as part of the money supply

Small-denominated time deposits, by definition: mature in one month or less. mature in one year or less. are less than $100,000. are held by state and local banks only.

are less than $100,000

The reserves of a commercial bank consist of: the amount of money market funds it holds. deposits at the Federal Reserve Bank and vault cash. government securities that the bank holds. the bank's net worth.

deposits at the federal reserve bank and vault cash

Answer the question on the basis of the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All figures are in billions. Assets: reserves $51 loans $109 securities $100 property $10 Liabilities + net worth: checkable deposits $140 stock shares $130 Refer to the data. If the commercial banking system actually loans the maximum amount it is able to lend: reserves and deposits equal to that amount will be gained. excess reserves will be $2.6 billion. excess reserves will fall to $1.7 billion. excess reserves will be reduced to zero.

excess reserves will be reduced to zero

As it relates to Federal Reserve activities, the acronym FOMC describes the: federal Open Market Committee. federal Options Market Committee. federal Organization for Monetary Control. federal Organization for Money Creation.

federal Open Market Committee

Overnight loans from one bank to another for reserve purposes entail an interest rate called the: prime rate. discount rate. federal funds rate. treasury bill rate.

federal funds rate

Assume that Smith deposits $600 in currency into her checking account in the XYZ Bank. Later that same day Jones negotiates a loan for $1,200 at the same bank. In what direction and by what amount has the supply of money changed? Decreased by $600. Increased by $1,800. Increased by $600. Increased by $1,200.

increases by $1,200

The purchasing power of money and the price level vary: inversely. directly during recessions but inversely during inflations. directly but not proportionately. directly and proportionately.

inversely

When a bank loan is repaid, the supply of money: is constant, but its composition will have changed. is decreased. is increased. may either increase or decrease.

is decreased

Which of the following is not part of the M2 money supply? money market mutual fund balances. money market deposit accounts. Currency. large-denominated time deposits.

large- denominated time deposits

Money is destroyed when: loans are made. checks written on one bank are deposited in another bank. loans are repaid. the net worth of the banking system declines.

loans are repaid

The greater the required reserve ratio, the: higher is the spending multiplier. lower is the spending multiplier. lower is the monetary multiplier. higher is the monetary multiplier.

lower is the monetary multiplier

When commercial banks use excess reserves to buy government securities from the public: new money is created. commercial bank reserves increase. the money supply falls. checkable deposits decline.

new money is created

(Consider This) Credits cards are: the fastest growing component of the M1 money supply. near-monies that are part of the M2 money supply but not the M1 money supply. not money, as officially defined. also known as time deposits.

not money, as officially defined

The primary purpose of the legal reserve requirement is to: prevent banks from hoarding too much vault cash. provide a means by which the monetary authorities can influence the lending ability of commercial banks. prevent commercial banks from earning excess profits. provide a dependable source of interest income for commercial banks.

provide a means by which the monetary authorities can influence the lending ability of commercial banks

If the monetary authorities want to reduce the monetary multiplier, they should: lower the required reserve ratio. raise the required reserve ratio. increase bank reserves. lower interest rates.

raise the required reserve ratio

If you place a part of your summer earnings in a savings account, you are using money primarily as a: medium of exchange. store of value. unit of account. standard of value.

store of value

The multiple by which the commercial banking system can expand the supply of money is equal to the reciprocal of: the MPS. its actual reserves. its excess reserves. the reserve ratio.

the reserve ratio

The Federal Open Market Committee (FOMC) is made up of:

the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis.

To say that coins are "token money" means that: their face value is less than their intrinsic value. their face value is greater than their intrinsic value. their face value is equal to their intrinsic value. they are not legal tender.

their face value is greater than their intrinsic value

Which one of the following is true about the U.S. Federal Reserve System? there are 12 regional Federal Reserve Banks. the head of the U.S. Treasury also chairs the Federal Reserve Board. there are 14 members of the Federal Reserve Board. the Open Market Committee is smaller in size than the Federal Reserve Board.

there are 12 regional federal reserve banks

Which of the following are all assets to a commercial bank? demand deposits, stock shares, and reserves. vault cash, property, and reserves. vault cash, property, and stock shares. vault cash, stock shares, and demand deposits.

vault cash, property, and reserves