Ch. 14 How Banks And Thrifts Create Money

10 Questions  I  By Ecofanics
Ch 14 McConnell and Brue.

  
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1.  Cash held by a bank is sometimes called vault cash.
A.
B.
2.  A check for $1000 drawn on Bank X by a depositor and deposited in Bank Y will increase the excess reserves in Bank Y by $1000.
A.
B.
3.  The actual reserves of a commercial bank equal excess reserves plus required reserves.
A.
B.
4.  If the banking system has $10 million in excess reserves and if the reserve ratio is 25%, the system can increase its loans by $40 million.
A.
B.
5.  There is a need for the Federal Reserve System to control the money supply because profit-seeking banks tend to make changes in the money supply that are pro-cyclical.
A.
B.
6.  The monetary multiplier is excess reserves divided by required reserves.
A.
B.
7.  The reason that the banking system can lend by a multiple of its excess reserves, but each individual bank can only lend "dollar for dollar" with its excess reserves, is that reserves lost by a single bank are not lost to the banking system as a whole.
A.
B.
8.  Mary Lynn, a music star, deposits a $30,000 check in a commercial bank and receives a checkable deposit in return; one hour later the Manford Iron and Coal Company borrows $30,000 from the same bank.  The money supply has increased by $30,000 as a result of the two transactions.
A.
B.
9.  Modern banking systems use hold as the basis for the fractional reserve system.
A.
B.
10.  The balance sheet of a commercial bank shows the transactions in which the bank has engaged during a given period of time.
A.
B.
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