Ch. 14 How Banks And Thrifts Create Money

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Money Quizzes & Trivia
Ch 14 McConnell and Brue.

  
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1.  When a borrower repays a loan of $500, either in cash or by check, the supply of money is reduced by $500.
A.
B.
2.  The monetary multiplier is excess reserves divided by required reserves.
A.
B.
3.  The selling of a government bond by a commercial bank will increase the money supply.
A.
B.
4.  When borrowers from a commercial bank wish to have cash rather than checkable deposits, the money creating potential of the banking system is increased.
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.  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.
7.  A commercial bank may maintain its legal reserve either as a deposit in its Federal Reserve Bank or as government bonds in its own vault.
A.
B.
8.  Cash held by a bank is sometimes called vault cash.
A.
B.
9.  The actual reserves of a commercial bank equal excess reserves plus required reserves.
A.
B.
10.  Modern banking systems use hold as the basis for the fractional reserve system.
A.
B.
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