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Ch. 14 How Banks And Thrifts Create Money

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

  
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1.  A commercial bank seeks both profits and liquidity, but these are conflicting goals.
A.
B.
2.  The reserve of a commercial bank in the Federal Reserve Bank is an asset of the Federal Reserve Bank.
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.  Cash held by a bank is sometimes called vault cash.
A.
B.
6.  The Federal funds rate is the interest rate at which the Federal government lends funds to commercial banks.
A.
B.
7.  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.
8.  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.
9.  The legal reserve that a commercial bank maintains must equal its own deposit liabilities multiplied by the required reserve ration.
A.
B.
10.  Legal reserves permit the Board of Governors of the Federal Reserve System to influence the lending ability of commercial banks.
A.
B.
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