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    4.4 Quiz

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    Joshua Hunt

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    4.4 Quiz

    Uploaded by

    Joshua Hunt
    5 views5 pages

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    © © All Rights Reserved

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    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    5 views5 pages

    4.4 Quiz

    Uploaded by

    Joshua Hunt

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    Name

    Period
    Date
    Quiz 4.4: Banking and the Expansion of the Money Supply

    1. Banks create money when 4. Which of the following would be included as


    a liability on a commercial bank’s balance
    (A) they make loans sheet?
    (B) the loans they make are repaid
    (C) they keep all excess reserves (A) Consumer loans
    (D) customers increase their cash withdrawals (B) Demand Deposits
    from their savings accounts (C) Net worth
    (E) the money multiplier is less than one (D) Bank Reserves
    (E) Treasury Bonds
    2. A commercial bank’s ability to create money
    depends on which of the following? 5. Which of the following explains why the
    amount predicted by the value of the simple
    (A) The existence of a central bank money multiplier may be overstated?
    (B) A fractional reserve banking system
    (C) Gold or silver reserves backing up the (A) It does not take into account the amount of
    currency bank loans.
    (D) A large national debt (B) It does not take into account the marginal
    (E) The existence of both checking and savings propensity to consume.
    accounts (C) It does not take into account a bank’s desire
    to hold excess reserves.
    3. Which of the following is a defining (D) It does not take into account changes to
    characteristic of a fractional reserve banking expected inflation.
    system? (E) It does not take into account changes in
    savings.
    (A) The existence of a central bank with a
    monopoly on money creation 6. Ms. Smith withdraws $1,000 from her safe
    (B) The use of paper money backed by a and deposits the money in a bank. If the bank
    commodity such as gold or silver holds no excess reserves and the reserve
    (C) The fact that banks retain an amount of bank requirement is 10 percent, how will this deposit
    reserves that is less than the amount of customer increase the bank’s required reserves and the
    demand deposits bank’s loans?
    (D) The requirement that banks maintain a
    certain percentage of their reserves as a deposit Required Reserves Loans
    in an account at the central bank
    (E) The regulations that separate investment (A) $1,000 $9,000
    banking from commercial banking (B) $1,000 $10,000
    (C) $900 $100
    (D) $100 $900
    (E) $100 $1,000
    7. Assume that the required reserve ratio is 10 9. Assume that Atlantic National Bank has
    percent, banks keep no excess reserves, and demand deposits of $100,000 and no excess
    borrowers deposit all loans made by banks. reserves, and that the reserve requirement is 10
    Suppose you have saved $100 in cash at home percent. A customer withdraws $5,000 from the
    and decide to deposit it in your checking bank. To meet the reserve requirement, the bank
    account. As a result of your deposit, the money must increase its reserves by
    supply can increase by a maximum of
    (A) $500
    (A) $800 (B) $1,000
    (B) $900 (C) $2,000
    (C) $1,000 (D) $4,000
    (D) $1,100 (E) $4,500
    (E). $1,200
    10. Assume that XYZ Bank has demand
    8. A bank has $800 million in demand deposits deposits of $50,000 and no excess reserves, and
    and $100 million in reserves. If the reserve that the reserve requirement is 10 percent. A
    requirement is 10 percent, the bank’s excess customer withdraws $2,000 from the bank. To
    reserves equal meet the reserve requirement, the bank must
    increase its reserves by
    (A) $10 million
    (B) $20 million (A) $1,000
    (C) $80 million (B) $1,800
    (D) $100 million (C) $2,000
    (E) $200 million (D) $3,000
    (E) $5,000
    4.5 Money Market Practice FRQ

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