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Ch. 14 How Banks And Thrifts Create Money

10 Questions  I  By Ecofanics
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Finance Quizzes & Trivia
Ch 14 McConnell and Brue.

  
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1.  The maximum checkable deposit expansion is equal to excess reserves divided by the monetary multiplier.
A.
B.
2.  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.
3.  A commercial bank seeks both profits and liquidity, but these are conflicting goals.
A.
B.
4.  Modern banking systems use hold as the basis for the fractional reserve system.
A.
B.
5.  The selling of a government bond by a commercial bank will increase the money supply.
A.
B.
6.  The actual reserves of a commercial bank equal excess reserves plus required reserves.
A.
B.
7.  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.
8.  The legal reserve that a commercial bank maintains must equal its own deposit liabilities multiplied by the required reserve ration.
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.  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.
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