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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 reserve of a commercial bank in the Federal Reserve Bank is an asset of the Federal Reserve Bank.
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.  A commercial bank seeks both profits and liquidity, but these are conflicting goals.
A.
B.
4.  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.
5.  When a borrower repays a loan of $500, either in cash or by check, the supply of money is reduced by $500.
A.
B.
6.  Cash held by a bank is sometimes called vault cash.
A.
B.
7.  A single commercial bank can safely lend an amount equal to its excess reserves multiplied by the monetary multiplier ration.
A.
B.
8.  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.
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.  The maximum checkable deposit expansion is equal to excess reserves divided by the monetary multiplier.
A.
B.
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