Chapter 15 ECON

A commercial bank has checkable-deposit liabilities of $50,000 and a required-reserve ratio of 20 percent. What is the amount of required reserves?

$ 10000

A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10 percent. The excess reserves of the bank are

$ 100000

A depositor places $5,000 in cash in a commercial bank, and the reserve ratio is 20 percent; the bank sends the $5,000 to the Federal Reserve Bank. As a result, the reserves of the bank have been increased by _________and excess reserves of the bank have been increased by ________ . If the bank lends out all excess reserves and the money creation process continues, the total money creation will be____________. Note: do not include the initial $5,000 deposit.

$5,000 $4,000 $20,000

A bank temporarily short of required reserves may be able to remedy this situation by: A. borrowing funds in the Federal funds market. B. granting new loans. C. shifting some of its vault cash to its reserve account at the Federal Reserve. D. buying bonds from the public.

A. borrowing funds in the Federal funds market.

The amount that a commercial bank can lend is determined by its: A. required reserves. B. excess reserves. C. outstanding loans. D. outstanding checkable deposits.

B. excess reserves.

Which of the following are all assets to a commercial bank? A. demand deposits, stock shares, and reserves B. vault cash, property, and reserves C. vault cash, property, and stock shares D. vault cash, stock shares, and demand deposits

B. vault cash, property, and reserves

Which of the following is correct? A. Required reserves minus actual reserves equal excess reserves. B. Required reserves equal excess reserves minus actual reserves. C. Required reserves equal actual reserves plus excess reserves. D. Actual reserves minus required reserves equal excess reserves.

D. Actual reserves minus required reserves equal excess reserves.

A commercial bank's reserves are: A. liabilities to both the commercial bank and the Federal Reserve Bank holding them. B. liabilities to the commercial bank and assets to the Federal Reserve Bank holding them. C. assets to both the commercial bank and the Federal Reserve Bank holding them. D. assets to the commercial bank and liabilities to the Federal Reserve Bank holding them.

D. assets to the commercial bank and liabilities to the Federal Reserve Bank holding them.

Which one of the following is presently a major deterrent to bank panics in the United States? A. the legal reserve requirement B. the fractional reserve system C. the gold standard D. deposit insurance

D. deposit insurance

Excess reserves refer to the: A. difference between a bank's vault cash and its reserves deposited at the Federal Reserve Bank. B. minimum amount of actual reserves a bank must keep on hand to back up its customers deposits. C. difference between actual reserves and loans. D. difference between actual reserves and required reserves.

D. difference between actual reserves and required reserves.

f m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio, then for the banking system: A. m = R − 1. B. R = m/1. C. R = m − 1. D. m = 1/R.

D. m = 1/R.

The goldsmith's ability to create money was based on the fact that: A. withdrawals of gold tended to exceed deposits of gold in any given time period. B. consumers and merchants preferred to use gold for transactions, rather than paper money. C. the goldsmith was required to keep 100 percent gold reserves. D. paper money in the form of gold receipts was rarely redeemed for gold.

D. paper money in the form of gold receipts was rarely redeemed for gold.

When a check is drawn and cleared, the A. reserves and deposits of both the bank against which the check is cleared and the bank receiving the check are unchanged by this transaction. B. bank against which the check is cleared loses reserves and deposits equal to the amount of the check. C. bank receiving the check loses reserves and deposits equal to the amount of the check. D. bank against which the check is cleared acquires reserves and deposits equal to the amount of the check.

B. bank against which the check is cleared loses reserves and deposits equal to the amount of the check.