Macro-economics self quiz #21

The money multiplier and the required reserve ratio are:

are inversely related.

Excess reserves are important because:

banks cannot make loans unless they have excess reserves.

Suppose the reserve ratio is 25%, then the money multiplier is

4

Which of the following is NOT true about bank runs?

Bank runs typically only happen to small banks with few financial assets.

A reserve requirement ratio is the:

fraction of deposits that the bank is required to hold.

Banks create money when they:

hold excess reserves.

Suppose the reserve ratio is 20%. If Holly deposits $1,000 of cash into her checking account and her bank lends $600 to Freda, the money supply:

increases by $600.

Which of the following is NOT one of the main features designed to protect depositors and the economy against bank runs?

interest rate ceilings

If banks were required to keep 100% of deposits in reserves, they could:

make no loans.

Probably the most important feature of deposit insurance is that it:

protects the economy against bank runs.

Bank reserves are:

the fraction of deposits kept in the form of very liquid assets.

The reserve ratio is the:

fraction of deposits the banks hold in their vaults plus their deposits at the Federal Reserve.

If a bank has deposits of $100,000, cash on hand of $10,000 and $15,000 on deposit at the Federal Reserve, and the required reserve ratio is 0.2, then the bank:

has excess reserves of $5,000

A bank run occurs when:

many bank depositors are trying to withdraw their funds from the bank all at one time.

The _______ multiplier is equal to _______ .

money; 1 divided by the required reserve ratiomoney; 1 divided by the required reserve ratio

The existence of banks:

results in the money supply being larger than the amount of currency in circulation.

Which of the following is designed to protect depositors from a bank run by insuring all deposits up to $250,000?

the FDIC