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| 1 | |
If the dollar amount of loans paid off exceeds the dollar amount of new loans issued: |
| | A) | money is destroyed |
| | B) | the value of money will decrease |
| | C) | money is created |
| | D) | there will be no impact on the quantity of money |
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| 2 | |
Suppose a bank has checkable deposits of $1,000,000 and the legal reserve ratio is 5 percent. If the institution has excess reserves of $5,000, then its actual reserves are: |
| | A) | $45,000 |
| | B) | $50,000 |
| | C) | $55,000 |
| | D) | $5,000 |
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| 3 | |
Assume that SIC, Inc. writes a $50,000 check on its account at Metro National Bank to repay the balance on a loan issued by this bank. As a result of this transaction: |
| | A) | the money supply declines by $50,000 |
| | B) | the money supply increases by $50,000 |
| | C) | the bank's excess reserves will decrease by $50,000 |
| | D) | the bank's required reserves will increase by $50,000 |
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| 4 | |
A single bank can safely increase its total loans by an amount equal to its: |
| | A) | required reserves |
| | B) | total reserves |
| | C) | excess reserves |
| | D) | total deposits |
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| 5 | |
The market in which banks borrow reserves from one another overnight is called the: |
| | A) | prime market |
| | B) | money market |
| | C) | short-term market |
| | D) | Federal funds market |
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| 6 | |
Answer the next question on the basis of the following table for a commercial bank:
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Refer to the above table. When the legal reserve ratio is 15 percent, the excess reserves of this single bank are: |
| | A) | $0 |
| | B) | $1,000 |
| | C) | $1,500 |
| | D) | $24,000 |
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| 7 | |
Money is created when: |
| | A) | loans are repaid |
| | B) | the net worth of the banking system is increased |
| | C) | banks acquire physical capital |
| | D) | banks make additional loans |
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| 8 | |
Assume the Continental National Bank's balance statement is as follows:
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Assume the legal reserve ratio is 10 percent. After a check for $20,000 is drawn and cleared against it, the bank's excess reserves would be: |
| | A) | $5,000 |
| | B) | $9,000 |
| | C) | $29,000 |
| | D) | $70,000 |
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| 9 | |
In which of the following scenarios is money created? |
| | A) | Johnson deposits her $2,000 weekly pay check at Morton Bank |
| | B) | Morton Bank adds to its total reserves held at the Federal Reserve Bank |
| | C) | Johnson takes out a loan from Morton Bank to purchase a new car |
| | D) | Johnson repays her car loan |
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| 10 | |
The fractional reserve system of banking: |
| | A) | requires a strong central bank to administer it |
| | B) | prevents banks from creating money |
| | C) | was born when goldsmiths learned that gold receipts were rarely redeemed for gold |
| | D) | is based on reserve requirements in excess of 100% |
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