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.  The Federal funds rate is the interest rate at which the Federal government lends funds to commercial banks.
A.
B.
2.  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.
3.  A single commercial bank can safely lend an amount equal to its excess reserves multiplied by the monetary multiplier ration.
A.
B.
4.  Modern banking systems use hold as the basis for the fractional reserve system.
A.
B.
5.  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.
6.  A commercial bank seeks both profits and liquidity, but these are conflicting goals.
A.
B.
7.  The maximum checkable deposit expansion is equal to excess reserves divided by the monetary multiplier.
A.
B.
8.  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.
9.  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.
10.  The legal reserve that a commercial bank maintains must equal its own deposit liabilities multiplied by the required reserve ration.
A.
B.
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