AP ECON MODULE 25

Assume that Linda deposits in her checking account the $1,000 cash she was keeping at home for an emergency. If the required reserve ratio is 0.20, what is the maximum change in the money supply from her deposit? A $1,000 B $1,250 C $2,000 D $4,000 E $5,000

D $4,000

If a commercial bank has no excess reserves and the reserve requirement is 10 percent, what is the value of new loans this single bank can issue if a new customer deposits $10,000 ? A $100,000 B $90,333 C $10,000 D $9,000 E $1,000

D $9,000

The table gives the value of selected assets and liabilities of a commercial bank's T-account. What is the maximum amount of new loans the bank could lend with the given amounts of reserves? A $10,000 B $20,000 C $30,000 D $50,000 E $70,000

A $10,000

A bank has $800 million in demand deposits and $100 million in reserves. If the reserve requirement is 10 percent, the bank's excess reserves equal A $10 million B $20 million C $80 million D $100 million E $200 million

B $20 million

Assume that the reserve requirement is 20 percent. If a bank initially has no excess reserves and $10,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loans is A $2,000 B $8,000 C $10,000 D $20,000 E $50,000

B $8,000

Assume that the required reserve ratio is 10 percent, banks keep no excess reserves, and borrowers deposit all loans made by banks. Suppose you have saved $100 in cash at home and decide to deposit it in your checking account. As a result of your deposit, the money supply can increase by a maximum of A $800 B $900 C $1,000 D $1,100 E $1,200

B $900

Assume that the reserve requirement is 10 percent. Marwa deposits $1 million in cash into her checking account at First Bank. The deposit will initially increase excess reserves at First Bank by A $100,000 B $900,000 C $1 million D $9 million E $10 million

B $900,000

If on receiving a checking deposit of $300 a bank's excess reserves increased by $255, the required reserve ratio must be A 5% B 15% C 25% D 35% E 45%

B 15%

Bank's ability to create money depends on ... Skill 1.A 1/1 MC point A commercial bank's ability to create money depends on which of the following? A The existence of a central bank B A fractional reserve banking system C Gold or silver reserves backing up the currency D A large national debt E The existence of both checking accounts and savings accounts

B A fractional reserve banking system

Assume that the reserve requirement is 15 percent and that a bank receives a new checking deposit of $200. Which of the following will most likely occur in the bank's balance sheet? A Liabilities: Increase by $200Required Reserves: Increase by $170 B Liabilities: Increase by $200Required Reserves: Increase by $30 C Liabilities: Increase by $200Required Reserves: Not change D Liabilities: Decrease by $200Required Reserves: Decrease by $30 E Liabilities: Decrease by $200Required Reserves: Decrease by $170

B Liabilities: Increase by $200Required Reserves: Increase by $30

Assume that the reserve requirement is 20 percent, but banks voluntarily keep some excess reserves. A $1 million increase in new reserves will result in A an increase in the money supply of $5 million B an increase in the money supply of less than $5 million C a decrease in the money supply of $1 million D a decrease in the money supply of $5 million E a decrease in the money supply of more than $5 million

B an increase in the money supply of less than $5 million

A commercial bank is facing the conditions given above. If the reserve requirement is 12 percent and the bank does not sell any of its securities, the maximum amount of additional lending this bank can undertake is A $15,000 B $12,000 C $3,000 D $1,800 E 0

C $3,000

Based on the balance sheets above for three different banks, which of the following is true, if the reserve requirement is 10 percent? A Bank A has no excess reserves. B Bank B has no excess reserves. C Bank B can increase its loans by $500. D Bank B can increase its loans by $40. E Bank C has excess reserves.

D Bank B can increase its loans by $40.

Assume that the reserve requirement for demand deposits is 20 percent, that banks hold no excess reserves, and that the public holds no currency. If the central bank sells $10,000 worth of government securities to commercial banks, the total money supply will A increase by $10,000 B increase by $50,000 C decrease by $10,000 D decrease by $50,000 E not change

D decrease by $50,000

Assume that Atlantic National Bank has demand deposits of $100,000 and no excess reserves,and that the reserve requirement is 10 percent.A customer withdraws $5,000 from the bank.To meet the reserve requirement, the bank must increase its reserves by A $500 B $1,000 C $2,000 D $4,000 E $4,500

E $4,500

Assume that the public holds part of its money in cash and the rest in checking accounts. If the central bank lowers the reserve requirement from 16 percent to 8 percent, the money supply will A decrease by more than half B decrease by half C decrease by less than half D exactly double E increase by less than double

E increase by less than double

Commercial banks can create money by A transferring depositors' accounts at the Federal Reserve for conversion to cash B buying Treasury bills from the Federal Reserve C sending vault cash to the Federal Reserve D maintaining a 100 percent reserve requirement E lending excess reserves to customers

E lending excess reserves to customers