Module 10: Quiz

What is a primary reason why, during the Great Depression, over 9000 banks in the US failed but not a single one in Canada (and in many other countries) did?

Canada allowed branch banking while the US did not

Which of the following is a function of the Federal Reserve? Choose all that apply. Collect and clear checks. Collect taxes. Print paper currency. Lend money directly to the public. Regulate the money supply. Hold bank deposit reserves.

Collect and clear checks. Regulate the money supply. Hold bank deposit reserves.

The opportunity cost of holding money is the

interest foregone from holding another financial asset.

The benefit of holding money is

its liquidity.

Which of the following assets is most liquid?

money

Suppose a bank receives $2,500,000 in checkable deposits from depositors and the required reserve ratio is 10%. If the bank fully loans out its new excess reserves, it can potentially increase the money supply by $ Just enter a value. Do not include the "$".

1. 22,500,000

Suppose a bank has $2,500,000 in checkable deposits and the required reserve ratio is 15%. Also, the bank is currently holding $700,000 in total reserves. As a result, this bank's required reserves are $ ______________ and its excess reserves are $_________________.

1. 375,000 2.325,000

Suppose a bank has $2,500,000 in checkable deposits and the required reserve ratio is 20%. Also, the bank is currently holding $700,000 in total reserves. As a result, this bank's required reserves are $ _____________ and its excess reserves are $ ____________. Just enter a value. Do not include the "$". Include a comma "," for values grater than 999. For example, 12,345.

1. 500,000 2. 200,000

If the reserve ratio is 25% and Federal Reserve buys $100,000 in U.S Treasury bonds, then the money supply for the banking system potentially ______________ by $ _________________.

1. increases 2. 400,000

Question #3 = chart in it review in quiz

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