Ch. 14 How Banks And Thrifts Create Money

10 Questions  I  By Ecofanics
Ch 14 McConnell and Brue.

  
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1.  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.
2.  The maximum checkable deposit expansion is equal to excess reserves divided by the monetary multiplier.
A.
B.
3.  When a borrower repays a loan of $500, either in cash or by check, the supply of money is reduced by $500.
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.  The actual reserves of a commercial bank equal excess reserves plus required reserves.
A.
B.
7.  The selling of a government bond by a commercial bank will increase the money supply.
A.
B.
8.  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.
9.  Legal reserves permit the Board of Governors of the Federal Reserve System to influence the lending ability of commercial banks.
A.
B.
10.  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.
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