Test Bank - Creating Environments for Learning: Birth to Age Eight 4th Edition ( Julie
Bullard, 2023), Chapter 1-17
What is a bank's balance sheet? - (answer)assets= liabilities + O.E.
things you own= things you owe + owner's share
What are the major assets of an average bank? - (answer)loans and securities
What are the major liabilities of an average bank? - (answer)savings and time deposits (CDs)
What is the fractional reserve system? - (answer)Financial intermediaries maintain reserves (cash) equal
to only a portion of their deposits
What is a primary deposit? - (answer)deposits that represent new reserves (cash) brought into the
banking system
What do we mean when we say that a bank "creates" money? - (answer)it makes loans though its excess
reserves (single bank)
banking system- can increase money supply by multiple accounts
What are reserve requirements, required reserves, and excess reserves? - (answer)reserve
requirements- % of primary deposits banks must keep on reserve either w/ FED or as vault cash
required reserves- the dollar amount of primary deposits that must be kept on reserve
excess- the $ amounts of reserves that are kept above the required reserves
Where do banks keep their required reserves? - (answer)FED
vault cash
What is the monetary multiplier and how does it affect the money-creation process? -
(answer)1/required reserve ratio
Bullard, 2023), Chapter 1-17
What is a bank's balance sheet? - (answer)assets= liabilities + O.E.
things you own= things you owe + owner's share
What are the major assets of an average bank? - (answer)loans and securities
What are the major liabilities of an average bank? - (answer)savings and time deposits (CDs)
What is the fractional reserve system? - (answer)Financial intermediaries maintain reserves (cash) equal
to only a portion of their deposits
What is a primary deposit? - (answer)deposits that represent new reserves (cash) brought into the
banking system
What do we mean when we say that a bank "creates" money? - (answer)it makes loans though its excess
reserves (single bank)
banking system- can increase money supply by multiple accounts
What are reserve requirements, required reserves, and excess reserves? - (answer)reserve
requirements- % of primary deposits banks must keep on reserve either w/ FED or as vault cash
required reserves- the dollar amount of primary deposits that must be kept on reserve
excess- the $ amounts of reserves that are kept above the required reserves
Where do banks keep their required reserves? - (answer)FED
vault cash
What is the monetary multiplier and how does it affect the money-creation process? -
(answer)1/required reserve ratio
