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Ch. 14 How Banks And Thrifts Create Money

10 Questions  I  By Ecofanics
Ch. 14 How Banks and Thrifts Create Money
Ch 14 McConnell and Brue.

  
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1.  The selling of a government bond by a commercial bank will increase the money supply.
A.
B.
2.  Goldsmiths increased the money supply when they accepted deposits of gold and issued paper receipts to the depositors.
A.
B.
3.  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.
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.  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.
6.  Legal reserves permit the Board of Governors of the Federal Reserve System to influence the lending ability of commercial banks.
A.
B.
7.  A desire by banks to hold excess reserves may reduce the size of the monetary multiplier.
A.
B.
8.  The actual reserves of a commercial bank equal excess reserves plus required reserves.
A.
B.
9.  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.
10.  Cash held by a bank is sometimes called vault cash.
A.
B.
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