QUIZ 3
Bank Balance Sheet Assets Liabilities & Net Worth Reserves $ 10,000 Deposits $100,000 Loans 100,000 Debt 20,000 Securities 40,000 Equity 30,000 Reference: Ref 4-1 (Table: Bank Balance Sheet) Based on the table, what is the leverage ratio at the bank?
5
If currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the monetary base equals:
$150 billion.
If the monetary base equals $400 billion and the money multiplier equals 2, then the money supply equals:
$800 billion.
A bank balance sheet consists of only the following items: Deposits $1,000 Reserves $100 Securities $400 Debt $500 Loans $2,000 What is the value of bank capital?
+$1,000
Bank Balance Sheet Assets Liabilities & Net Worth Reserves $ 10,000 Deposits $100,000 Loans 100,000 Debt 20,000 Securities 40,000 Equity 30,000 Reference: Ref 4-1 (Table: Bank Balance Sheet) Based on the table, what is the reserve-deposit ratio at the bank?
10 percent
If the currency-deposit ratio equals 0.5 and the reserve-deposit ratio equals 0.1, then the money multiplier equals:
2.5.
Bank Balance Sheet Assets Liabilities & Net Worth Reserves $ 10,000 Deposits $100,000 Loans 100,000 Debt 20,000 Securities 40,000 Equity 30,000 Reference: Ref 4-1 (Table: Bank Balance Sheet) Based on the table, owners' equity will fall to zero if loan defaults reduce the value of total assets by _____ percent.
20
The money supply will decrease if the:
currency-deposit ratio increases.
If the Federal Reserve wishes to increase the money supply, it should:
decrease the discount rate.
In a fractional-reserve banking system, banks create money because:
each dollar of reserves generates many dollars of demand deposits.
Money that has no value other than as money is called ______ money.
fiat
Assets of banks include:
loans to customers.
If the Federal Reserve increases the interest rate paid on reserves, banks will tend to hold _____ excess reserves, which will _____ the money multiplier.
more; decrease
In a system with 100-percent-reserve banking:
no banks can make loans.
To reduce the money supply, the Federal Reserve:
sells government bonds.
If the ratio of currency to deposits (cr) increases, while the ratio of reserves to deposits (rr) is constant and the monetary base (B) is constant, then:
the money supply decreases.
The monetary base consists of:
currency held by the public, plus reserves held by banks.
The money supply consists of:
currency plus demand deposits.
The central bank in the United States is the:
Federal Reserve.
Banks create money in:
a fractional-reserve banking system but not in a 100-percent-reserve banking system.