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Ch. 14 How Banks And Thrifts Create Money

10 Questions  I  By Ecofanics
Ch. 14 How Banks and Thrifts Create Money
Ch 14 McConnell and Brue.

  
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1.  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.
2.  The selling of a government bond by a commercial bank will increase the money supply.
A.
B.
3.  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.
4.  The Federal funds rate is the interest rate at which the Federal government lends funds to commercial banks.
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.  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.
7.  The balance sheet of a commercial bank shows the transactions in which the bank has engaged during a given period of time.
A.
B.
8.  Modern banking systems use hold as the basis for the fractional reserve system.
A.
B.
9.  The monetary multiplier is excess reserves divided by required reserves.
A.
B.
10.  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.
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