ECON 2100 Chapter 14 Quiz
with complete verified
solutions
Banks earn a profit on the difference between - answer interest charged on
loans and interest paid on deposits
If you know the required reserve ratio and the total value of a bank's assets,
then you know how much the bank is holding in reserves. - answer False
If the required reserve ratio is 10 percent and a bank receives a new deposit
for $100,000, then the - answer bank's liabilities increase by $100,000
The money expansion process continues until there are no more - answer
excess reserves in the system that banks are willing to lend
The simple money multiplier is defined as - answer 1/required reserve ratio
The higher the required reserve ratio, - answer the smaller the money
multiplier
The Fed can increase the amount of excess reserves in the banking system
by - answer lending at the discount window
The Federal Reserve may increase the money supply by - answer lending
reserves to banks
To increase the money supply, the Fed might - answer decrease the reserve
requirement and the discount rate
, If the Fed sells U.S. government securities to a member bank and debits that
bank's reserve account, - answer the Fed's assets decrease
If the Fed buys U.S. government securities from a bank and credits the
bank's reserve account, - answer the Fed's assets increase
In order to meet a deficiency of excess reserves, a bank could - answer
borrow from another bank in the federal funds market
A single bank can increase the money supply by the increase in its excess
reserves times the simple money multiplier. - answer False
Which of the following would likely increase the money supply? - answer
federal funds market
Which of the following would likely increase the money supply? - answer A
bank sells government securities to the Fed.
If a bank sells a $1,000 security to the Fed and the required reserve ratio is
20 percent, - answer the bank has $1,000 in additional excess reserves, all of
which it can lend out
If a bank borrows $1,000 from the Fed and lends it out, the bank sets in
motion a process that will result in an expansion of the money supply by a
multiple of that $1,000. - answer True
Which of the following make up the money supply as it is most narrowly
defined? - answer coins and currency held by the nonbank public, checking
deposits, and traveler's checks
M1 includes currency held in bank vaults. - answer False
with complete verified
solutions
Banks earn a profit on the difference between - answer interest charged on
loans and interest paid on deposits
If you know the required reserve ratio and the total value of a bank's assets,
then you know how much the bank is holding in reserves. - answer False
If the required reserve ratio is 10 percent and a bank receives a new deposit
for $100,000, then the - answer bank's liabilities increase by $100,000
The money expansion process continues until there are no more - answer
excess reserves in the system that banks are willing to lend
The simple money multiplier is defined as - answer 1/required reserve ratio
The higher the required reserve ratio, - answer the smaller the money
multiplier
The Fed can increase the amount of excess reserves in the banking system
by - answer lending at the discount window
The Federal Reserve may increase the money supply by - answer lending
reserves to banks
To increase the money supply, the Fed might - answer decrease the reserve
requirement and the discount rate
, If the Fed sells U.S. government securities to a member bank and debits that
bank's reserve account, - answer the Fed's assets decrease
If the Fed buys U.S. government securities from a bank and credits the
bank's reserve account, - answer the Fed's assets increase
In order to meet a deficiency of excess reserves, a bank could - answer
borrow from another bank in the federal funds market
A single bank can increase the money supply by the increase in its excess
reserves times the simple money multiplier. - answer False
Which of the following would likely increase the money supply? - answer
federal funds market
Which of the following would likely increase the money supply? - answer A
bank sells government securities to the Fed.
If a bank sells a $1,000 security to the Fed and the required reserve ratio is
20 percent, - answer the bank has $1,000 in additional excess reserves, all of
which it can lend out
If a bank borrows $1,000 from the Fed and lends it out, the bank sets in
motion a process that will result in an expansion of the money supply by a
multiple of that $1,000. - answer True
Which of the following make up the money supply as it is most narrowly
defined? - answer coins and currency held by the nonbank public, checking
deposits, and traveler's checks
M1 includes currency held in bank vaults. - answer False
