econ chapter 33
If the reserve requirement is 25% and a customer deposits $2000 in a demand deposit account, the bank's excess reserves will increase by
$1,500
The balance sheet above shows the current financial status of Horvath National Bank. If the reserve requirement is 20 percent and the bank does not sell any securities, by how much could it increase loans?
$15,000
When a customer deposits $200 cash into his checking account at the bank, the money supply
does not change
The portion of demand deposits banks are legally allowed to loan are known as
excess reserves
The federal funds rate is the
interest rate banks charge each other for short-term loans
When individuals decide to hold money as currency and not deposit it in banks, the growth of the money supply will be
less than potential
A customer's checkable deposits would be entered on a bank's balance sheet as
liabilities
The primary purpose of the reserve requirement is to
limit the lending ability of commercial banks
Commercial banks create money by
making loans
A fractional reserve system requires banks to keep a fraction of demand deposits in
vault cash or deposits at a Federal Reserve Bank
QXR bank suddenly acquires excess reserves of $10,000 and decides to lend an amount equal to its newly acquired excess reserves. If the required reserve ratio is 20 percent, the total amount of new money created will be
$40,000
If the reserve requirement is 25% and a customer deposits $2000 into a demand deposit account, the bank's required reserves will increase by
$500
If the reserve requirement is 25% and a customer deposits $2000 in a demand deposit, what is the largest possible expansion of the money supply?
$6,000
Assume a bank has no excess reserves and the reserve requirement is 20 percent. If a customer deposits $20,000 in currency into his checking account, what is the maximum amount by which banks will increase the money supply through multiple deposit expansion in the banking system?
$80,000
Assume the reserve requirement is 15 percent and a bank initially has no excess reserves. If a customer deposits $1,000, how much of that deposit can be loaned?
$850
If the reserve requirement is 25%, what is the money multiplier?
4
A customer deposits $2,000 into a checkable account. The receiving bank holds no excess reserves and issues loans to the full amount of $1,200. The reserve requirement is
40 percent
The reserve requirement is determined by the
Federal Reserve
The money supply would fail to fully expand to its potential growth if I. customers chose to hold their money in cash rather than re-deposit funds into banks II. customers chose not to take out loans from banks III. banks chose not to loan out all of their excess reserves
I, II, and III
Thebalance sheet of a commercial bank is a statement of I. what is owned by the bank II. what is owed to the bank III. all claims on what is owned by or owed to the bank
I, II, and III
A higher reserve requirement will cause I. a larger money multiplier II. a smaller potential growth of the money supply III. a larger percentage of each checkable deposit to be loaned
II only
Money is created or destroyed whenever I. checks are deposited into checkable accounts at commercial banks II. checks are drawn against checkable accounts at commercial banks III. loans are made by commercial banks that are then converted into checkable deposits IV. loans at commercial banks are repaid by borrowers
III and IV only
Commercial banks increase the money supply by
buying bonds from the public