Chapter 13 Banks

If the banking system has demand deposits of $100,000, total reserves equal to $20,000 and a required reserve ratio of 20 percent, the banking system can increase the volume of loans by - $100,000 - $0 - $80,000 - $20,000

$0

Suppose a bank has $100,000 in deposits, a required reserve ratio of 20 percent, and total reserves of $20,000. Then this bank can make new loans in the amount of - $100,000 - $40,000 - $0 - $20,000

$0

Suppose a bank has $1 million in deposits, a required reserve ratio of 25 percent and total reserves of $600,000. Then it has excess reserves of -$250,000 -$350,000 -$1,000,000 -$600,000

$350,000

Suppose a bank has $1 million in deposits, a required reserve ratio of 25 percent, and total reserves of $600,000. Then it has excess reserves of - $250,000 - $1,000,000 - $600,000 - $350,000

$350,000

Suppose a bank has $200,000 in deposits, a required reserve ratio of 15 percent, and total reserves of $100,000. Then it has excess reserves of - Negative $100,000 - $200,000 - $70,000 - $30,000

$70,000

If the banking system has a required reserve ratio of 10 percent, the money multiplier is - 0.9 - 10.0 - 0.1 - 1.11

10.0 1/ required reserve = 1/0.1

If the banking system has a required reserve ratio of 25 percent, the money multiplier is - 0.2 - 0.25 - 4.0 - 1.25

4.0

if the banking system has a required reserve ratio of 20 percent, the money multiplier is - 5.0 - 0.8 -0.2 - 1.25

5.0 1/0.20

Using the information in the text, of the following forms of money: cash, checking accounts, savings accounts, which is the largest component of: a) M1 - cash - checking accounts - savings accounts b) M2 - cash - checking accounts - savings accounts

a) checking accounts b) savings accounts

An essential function for a bank is to - lend all of its deposits - create money through lending - minimize its reserve ratio - maximize its assets

create money through lending

A bank may lend an amount equal to its - total assets - total reserves - excess reserve - required reserves

excess reserves

Suppose a banking system has $200 million in deposits, a required reserve ratio of 10 percent, and total bank reserves of $35 million. Then the potential increase in deposit creation for the whole banking system is equal to - $150 million - $15 million - $3 million - $0

$150 million

Suppose a bank has $160,000 in deposits and a required reserve ratio of 10 percent. Then required reserves are : - $160,000 - $16,000 - $1,6000 - $1,600,000

$16,000

Suppose a banking system has a required reserve ratio of 10 percent. What is the maximum possible increase in the money supply in response to a $2 billion increase in excess reserves for the whole banking system? - $210 billion -$20 billion -$200 million -$2 billion

$20 billion the money multiplier is 1/ required reserve ratio = 1/0.1 = 10...so a $2 billion increase in reserves leads to a 10* $2 billion = $20billion increase in new loans

If excess reserves are $10,000, demand deposits are $100,000, and the required reserve ratio is 10 percent, then total reserves are: - $20,000 - $0 - $110,000 - $10,000

$20,000 total = excess reserve + required reserves 10,000 + (100,000*.10) = $20,000

suppose bank has $200,000 in deposits, a required reserve ratio 10 percent, and bank reserves of $45,000. Then this bank can make new loans in the amount of - $20,000 - $10,000 - $2,500 - $25,000

$25,000

Suppose a banking system has $120 million deposits, a required reserve ratio of 20 percent, and total bank reserves for the whole system of $100 million. Then the potential increase in deposit creation for the whole system is equal to : - $0 - $76 million - $380 million - $120 million

$380 120*0.20 = 24million required reserve $100 million is current holding 100-24 = 76 * money mult 76 * (1/0.2) or 76* 5 = $380 million

If the banking system has demand deposits of $200,000, total reserves equal to $60,000, and a required reserve reserve ration of 25 percent, the banking system can increase the volume of loans by a maximum of - $60,000 - $200,000 - $40,000 - $10,000

$40,000

Suppose a bank has $300,000 in deposits and a required reserve ratio of 15 percent. The required reserves are: - $45000 - $3000000 - $255000 - $4500

$45000

Suppose a bank has $200,000 in deposits, a required reserve ratio of 25 percent, and total reserves of $100,000. Then it has excess reserves of - $20,000 - $100,000 - $50,000 - $25,000

$50,000

Suppose a bank has $500,000 in deposits and a required reserve ratio of 10 percent. Then required reserves are - $500,000 - $10,000 - $50,000 - $5,000,000

$50,000

If the banking system has demand deposits of $100,000, total reserves equal $15,000, and a required reserve ratio of 10 percent, the banking system can increase the volume of loans by a maximum of : - $85,000 - $5,000 - $50,000 - $100,000

$50,000 100000*.10 = $5000 in excess reserves with 10 percent required reserve ratio, or money multiplier of 10, the bank can create : 50000/0.10 = $50000

Suppose a banking system has a required reserve ratio of 0.10. How much can the money supply in response to a $500 increase in excess reserves for the whole banking system? - $500 - $4,500 - $5,000 - $50

$5000

Suppose a banking system has a required reserve ratio of 0.15. How much can the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system? - $6.67 billion -$1 billion -$15 billion -$150 billion

$6.67 billion 1/0.15 = 6.667 1billion *money multiplier = 1billion * 6.667 = $6.67 billion

Given a required reserve ratio of 0.25, what is the maximum amount that the money supply can increase in response to a $200 million increase in excess reserves for the whole banking system? - $500 million - $250 million - $200 million - $800 million

$800 million

Suppose University Bank has zero excess reserves. If the required reserve ratio decreases, the - bank will not have enough required reserves - bank will be able to make more loans - money multiplier will decrease - bank's assets will increase

- bank will be able to make more loans if the required reserve ratio decreases

Which of the following insures deposits at banks? - The FSLIC - The RTC - The FDIC - The Federal Reserve

The FDIC

Which of the following is not considered to be a private depository institution? - Commercial banks - The Federal Reserve - Savings and loan associations - Mutual savings banks

The Federal Reserve

Which of the following sets the legal minimum reserve ratio? - the commercial banks - the US Treasury - congress - the Federal Reserve

The Federal Reserve

For a small bank in a large banking system, excess reserves are equal to the - Amount of money that the US Treasury makes available for loans - The amount of loans a bank can make after meeting the reserve requirement - The difference between transactions account balances and loans - The amount of reserves that a bank must hold equal to the loans that it makes

The amount of loans a bank can make after meeting the reserve requirement

Students Bank and Trust has zero excess reserves. Ceteris paribus, if the required reserve ration decreases: - Bank assets will decrease - The money multiplier will decrease - The bank will be able to make additional loans - Required reserves will increase

The bank will be able to make additional loans

Initially a bank has a required reserve ratio of 15 percent, and no excess reserves. If $10,000 is deposited in the bank, then, ceteris paribus - This bank can increase loans by $1,500 - This bank can increase loans by $8,500 - Total reserves will increase by $8,500 - Required reserves will increase $10,000

This bank can increase loans by $8,500

Deposit creation occurs when - a person takes money out of the banking system and holds it as cash - a bank borrows dollars from the Federal Reserve - a bank lends money - a person takes money out of one bank and puts it in another bank

a bank lends money

If a bank has total deposits of $100,000 and reserves of $30,000 a) what is the current percentage of deposits held in reserve? b) what percentage of deposits are currently loaned out?

a) 30% b) 70%

The banking system can lend the sum of its excess reserves because - banks are required to keep only a fraction of deposits on reserve - required reserves are a leakage from the banking system - the money multiplier is less than 1 - bank assets are greater than bank liabilities

bankers are required to keep only a fraction of deposits on reserve

The required reserve ratio is the - fraction of deposits that banks can lend out - highest level of interest rates that can legally be charged to borrowers - fraction of total deposits banks must hold - fraction of loans to shareholders equity

fraction of total deposits bankers must hold

the minimum amount of reserves a bank is required to hold is known as: - required reserve ratio - excess reserves - total reserves - the money multiplier

required reserve ratio

The ratio of a bank's total reserves to its total transactions deposits is known as the: - required reserves - excess reserves - deposit ratio - reserve ratio

reserve ratio

The term fractional reserves refers to - The fact that reserves are split among many banks - ratio of excess reserves to total loans - reserves being a small fraction of total transactions account balances - the ration of required reserves to total loans

reserves being a small fraction of total transactions account balances

If bank customers decide as a group to pay off their loans and to not take out any new loans, ceteris paribus - the money supply will increase - the money supply will decrease - excess reserves will decrease - the money multiplier will decrease

the money supply will decrease

Initially a bank has a required reserve ratio of 10 percent and no excess reserves. If $1,000 is deposited into the bank, then, ceteris paribus - total reserves will increase by $900 - required reserves will increase by $1000 - this bank can increase its loans by $1000 - this bank can increase its loans by $900

this bank can increase its loans by $900

Excess reserves are - total reserves less required reserves - bank reserves in excess of vault cash - total reserves less transactions account balances - required reserves less demand deposits

total reserves less required reserves excess reserve are reserves held above and beyond what is required by the Federal Reserve

One of the essential functions a bank performs is that of - participating in the stock market - creating money by lending required reserves - transferring money from savers to borrowers - purchasing government bonds

transferring money from savers to borrowers