Ch. 14 How Banks And Thrifts Create Money
10 Questions
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Ch 14 McConnell and Brue.
Questions and Answers
- 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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