Ch. 14 How Banks And Thrifts Create Money

10 Questions  I  By Ecofanics
Ch 14 McConnell and Brue.

  
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1.  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.
2.  The granting of a $5000 loan and the purchase of a $5000 government bond from a securities dealer by a commercial bank have the same effect on the money supply.
A.
B.
3.  Goldsmiths increased the money supply when they accepted deposits of gold and issued paper receipts to the depositors.
A.
B.
4.  The maximum checkable deposit expansion is equal to excess reserves divided by the monetary multiplier.
A.
B.
5.  The legal reserve that a commercial bank maintains must equal its own deposit liabilities multiplied by the required reserve ration.
A.
B.
6.  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.
7.  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.
8.  Legal reserves permit the Board of Governors of the Federal Reserve System to influence the lending ability of commercial banks.
A.
B.
9.  The monetary multiplier is excess reserves divided by required reserves.
A.
B.
10.  A desire by banks to hold excess reserves may reduce the size of the monetary multiplier.
A.
B.
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