Ch. 14 How Banks And Thrifts Create Money

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

  
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Questions and Answers

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  • 1. 
    The balance sheet of a commercial bank shows the transactions in which the bank has engaged during a given period of time.
    • A. 

      True

    • B. 

      False


  • 2. 
    Goldsmiths increased the money supply when they accepted deposits of gold and issued paper receipts to the depositors.
    • A. 

      True

    • B. 

      False


  • 3. 
    Modern banking systems use hold as the basis for the fractional reserve system.
    • A. 

      True

    • B. 

      False


  • 4. 
    Cash held by a bank is sometimes called vault cash.
    • A. 

      True

    • B. 

      False


  • 5. 
    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. 

      True

    • B. 

      False


  • 6. 
    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. 

      True

    • B. 

      False


  • 7. 
    The legal reserve that a commercial bank maintains must equal its own deposit liabilities multiplied by the required reserve ration.
    • A. 

      True

    • B. 

      False


  • 8. 
    Legal reserves permit the Board of Governors of the Federal Reserve System to influence the lending ability of commercial banks.
    • A. 

      True

    • B. 

      False


  • 9. 
    The actual reserves of a commercial bank equal excess reserves plus required reserves.
    • A. 

      True

    • B. 

      False


  • 10. 
    The reserve of a commercial bank in the Federal Reserve Bank is an asset of the Federal Reserve Bank.
    • A. 

      True

    • B. 

      False


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