Question 1

Exhibit 15-2 Balance Sheet of Springfield National Bank   
In Exhibit 15-2, if Springfield National finds that it has excess reserves of $300, then the required reserve ratio must be:
A)30 percent.
B)0.30 percent.
C)0.80 percent.
D)0.20 percent.
E)20 percent.

Accepted Answer

The answer of Exhibit 15-2 Balance Sheet of Springfield National...

Question 2

Exhibit 15-1 Balance sheet of First Iliad State Bank
                
       
In Exhibit 15-1, if the required reserve ratio is lowered to 5 percent, First Iliad State will be able to make additional loans worth:
A)$9,000,000.
B)$1,500,000.
C)$500,000.
D)$1,000,000.
E)$450,000.

Accepted Answer

The answer of Exhibit 15-1 Balance sheet of First Iliad...

Question 3

If your bank receives a checkable deposit of $20,000, and the banking system makes loans totaling $180,000, the maximum possible, then the required reserve ratio must be:
A)0.10.
B)0.20.
C)0.25.
D)0.40.
E)0.50.

Accepted Answer

The answer of If your bank receives a checkable deposit...

Question 4

Exhibit 15-2 Balance Sheet of Springfield National Bank
 In Exhibit 15-2, if Springfield National has excess reserves equal to $300, and the required reserve ratio increases to 35 percent, it will:
A)be able to cover its increased reserve requirements from its excess reserves.
B)have to call in loans worth $350.
C)have to call in loans worth $250.
D)have to call in loans worth $200.
E)have to call in loans worth $150.

Accepted Answer

The answer of Exhibit 15-2 Balance Sheet of Springfield National...

Question 5

Exhibit 15-1 Balance sheet of First Iliad State Bank
               
       
In Exhibit 15-1, if the required reserve ratio is raised to 18 percent, then First Iliad State will:
A)have to convert loans worth $800,000 to required reserves.
B)have to convert loans worth $200,000 to required reserves.
C)be able to make additional loans worth $800,000.
D)be able to make additional loans worth $200,000.

Accepted Answer

The answer of Exhibit 15-1 Balance sheet of First Iliad...

Question 6

Exhibit 15-2 Balance Sheet of Springfield National Bank  In Exhibit 15-2, if Springfield National's customers write checks for $200 and the required reserve ratio is 20 percent, then its required reserves fall to:
A)$0.
B)$40.
C)$160.
D)$460.
E)$260.

Accepted Answer

The answer of Exhibit 15-2 Balance Sheet of Springfield National...

Question 7

Exhibit 15-2 Balance Sheet of Springfield National Bank  In Exhibit 15-2, if Springfield National has excess reserves equal to $300, and then its customers write checks for $200, its excess reserves will fall to:
A)$0.
B)$100.
C)$140.
D)$160.
E)$200.

Accepted Answer

The answer of Exhibit 15-2 Balance Sheet of Springfield National...

Question 8

If loans are $69,000, excess reserves are $1,400, and checkable deposits are $80,000, then the required reserve ratio must be:
A)1.75 percent.
B)12 percent.
C)13.75 percent.
D)17.5 percent.
E)0.12 percent.

Accepted Answer

Required reserve ratio = (loans + reserves)/(checkable deposits)
Required reserve ratio = (69,000 + 1,400)/(80,000)
Required reserve ratio = 70,400/80,000
Required reserve ratio = 0.88 or 88/1000 or 8.8%
Therefore, the required reserve ratio is 8.8%, which is closest to option B, i.e. 12%.

Question 9

If a single banks faces a required reserve ratio of 20 percent, has total reserves of $500,000, and checkable deposit liabilities of $400,000, what is the maximum amount of money this bank could create (add to the money supply)?
A)$420,000.
B)$100,000.
C)$80,000.
D)$2,100,000.

Accepted Answer

The answer of If a single banks faces a required...

Question 10

Exhibit 15-1 Balance sheet of First Iliad State Bank
 In Exhibit 15-1, if the required reserve ratio is raised to 15 percent, First Iliad State will have to convert loans worth:
A)$9,000,000 to required reserves.
B)$1,500,000 to required reserves.
C)$500,000 to required reserves.
D)$1,000,000 to required reserves.
E)$450,000 to required reserves.

Accepted Answer

The answer of Exhibit 15-1 Balance sheet of First Iliad...

Question 11

Best National Bank is subject to a 10 percent required reserve ratio. If this bank received a new checkable deposit of $1,000, it could make new loans of:
A)$100.
B)$900.
C)$1,000.
D)$10,000.

Accepted Answer

The required reserve ratio of 10 percent means that Best National Bank is required to hold onto 10 percent of the new deposit, which is $100. The remaining $900 can be used to make new loans.

Question 12

A bank that has $10,000 in excess reserves can extend new loans up to a maximum of:
A)$1,000.
B)$9,000.
C)$10,000.
D)$100,000.

Accepted Answer

Excess reserves are the amount of funds that a bank holds beyond the required reserve ratio. Since the bank has $10,000 in excess reserves, it means that it has already set aside the required reserve amount for all of its deposits. Therefore, it can extend new loans up to the full amount of its excess reserves, which is $10,000.

Question 13

Which of the following correctly is the money multiplier?
A)The required reserve ratio.
B)1\(1 - the required reserve ratio).
C)1\(required reserve ratio).
D)1\(1 - MPC).

Accepted Answer

The answer of Which of the following correctly is the...

Question 14

The required reserve ratio is:
A)the minimum amount of reserves the Fed requires a bank to hold.
B)the interest rate that the Fed charges banks who borrow from it.
C)the interest rate on loans made by banks to other banks.
D)the maximum percentage of the cost of a stock that can be borrowed from a bank, with the stock offered as collateral.
E)an appeal by the Fed to banks, asking for voluntary compliance with the Fed's wishes.

Accepted Answer

The required reserve ratio is the minimum amount of reserves that the Federal Reserve requires banks to hold. This reserve is usually held in the form of deposits with the Federal Reserve or in their own vaults. The purpose of the reserve requirement is to ensure that banks have enough cash on hand to meet their customers' withdrawal requests and to maintain stability in the banking system.

Question 15

If loans are $300,000, checkable deposits are $600,000, and the required reserve ratio is 40 percent, then excess reserves are:
A)$360,000.
B)$240,000.
C)$120,000.
D)$60,000.
E)$30,000.

Accepted Answer

The answer of If loans are $300,000, checkable deposits are...

Question 16

Exhibit 15-1 Balance sheet of First Iliad State Bank
                
       
In Exhibit 15-1, if the required reserve ratio is lowered to 8 percent, then First Iliad State will:
A)have to convert loans worth $800,000 to required reserves
B)have to convert loans worth $200,000 to required reserves.
C)be able to make additional loans worth $800,000.
D)be able to make additional loans worth $200,000.
E)not have to act.

Accepted Answer

The answer of Exhibit 15-1 Balance sheet of First Iliad...

Question 17

The required reserve ratio is the:
A)actual amount of reserves that banks must hold.
B)excess amount of reserves that a bank must hold.
C)minimum amount of reserves the Fed requires a bank to hold.
D)total amount of reserves that banks hold at all times.
E)maximum amount of reserves that banks can hold to remain liquid.

Accepted Answer

The required reserve ratio is the minimum amount of reserves that the Federal Reserve (the Fed) requires banks to hold. It is the percentage of total deposits that banks must keep on reserve either in their vaults or on deposit with the Fed. This requirement is meant to ensure that banks have enough liquid assets to meet customers' demands for withdrawals and prevent bank runs.

Question 18

If a bank that is subject to a 10 percent required reserve ratio has $20,000 in excess reserves, it can make new loans of:
A)$2,000.
B)$18,000.
C)$20,000.
D)$200,000.

Accepted Answer

The answer of If a bank that is subject to...

Question 19

Suppose the required reserve ratio is 3 percent, and currency and reserves total $10 million. The maximum money supply that can be supported is:
A)$13 million.
B)$30 million.
C)$97 million.
D)$333.3 million.

Accepted Answer

The answer of Suppose the required reserve ratio is 3...

Question 20

Best National Bank is subject to a 20 percent required reserve ratio. If this bank received a new checkable deposit of $1,000, it could make new loans of:
A)$500.
B)$800.
C)$1,000.
D)$5,000.

Accepted Answer

The required reserve ratio is 20%, which means the bank must hold onto 20% of any new deposits in reserves and can lend out the other 80%. Therefore, the bank could make new loans of 80% of $1,000, which is $800.

Quiz 15: Money Creation

Exhibit 15-2 Balance Sheet of Springfield National Bank In Exhibit 15-2, if Springfield National finds that it has excess reserves of $300, then the required reserve ratio must be:

Exhibit 15-1 Balance sheet of First Iliad State Bank In Exhibit 15-1, if the required reserve ratio is lowered to 5 percent, First Iliad State will be able to make additional loans worth:

If your bank receives a checkable deposit of $20,000, and the banking system makes loans totaling $180,000, the maximum possible, then the required reserve ratio must be:

Exhibit 15-2 Balance Sheet of Springfield National Bank In Exhibit 15-2, if Springfield National has excess reserves equal to $300, and the required reserve ratio increases to 35 percent, it will:

Exhibit 15-1 Balance sheet of First Iliad State Bank In Exhibit 15-1, if the required reserve ratio is raised to 18 percent, then First Iliad State will:

Exhibit 15-2 Balance Sheet of Springfield National Bank In Exhibit 15-2, if Springfield National's customers write checks for $200 and the required reserve ratio is 20 percent, then its required reserves fall to:

Exhibit 15-2 Balance Sheet of Springfield National Bank In Exhibit 15-2, if Springfield National has excess reserves equal to $300, and then its customers write checks for $200, its excess reserves will fall to:

If loans are $69,000, excess reserves are $1,400, and checkable deposits are $80,000, then the required reserve ratio must be:

If a single banks faces a required reserve ratio of 20 percent, has total reserves of $500,000, and checkable deposit liabilities of $400,000, what is the maximum amount of money this bank could create (add to the money supply) ?

Exhibit 15-1 Balance sheet of First Iliad State Bank In Exhibit 15-1, if the required reserve ratio is raised to 15 percent, First Iliad State will have to convert loans worth:

Best National Bank is subject to a 10 percent required reserve ratio. If this bank received a new checkable deposit of $1,000, it could make new loans of:

A bank that has $10,000 in excess reserves can extend new loans up to a maximum of:

Which of the following correctly is the money multiplier?

The required reserve ratio is:

If loans are $300,000, checkable deposits are $600,000, and the required reserve ratio is 40 percent, then excess reserves are:

Exhibit 15-1 Balance sheet of First Iliad State Bank In Exhibit 15-1, if the required reserve ratio is lowered to 8 percent, then First Iliad State will:

The required reserve ratio is the:

If a bank that is subject to a 10 percent required reserve ratio has $20,000 in excess reserves, it can make new loans of:

Suppose the required reserve ratio is 3 percent, and currency and reserves total $10 million. The maximum money supply that can be supported is:

Best National Bank is subject to a 20 percent required reserve ratio. If this bank received a new checkable deposit of $1,000, it could make new loans of: