Question 1

Commercial banks are required by law to hold reserves.These reserves are specified as percentages of a bank's

Accepted Answer

A)  total assets.
B)  total liabilities.
C)  checkable deposit liabilities.
D)  holdings of government securities.
E)  net worth.

Question 2

Secondary reserves are

Accepted Answer

A)  high-risk investments.
B)  government securities held by banks.
C)  assets a borrower pledges to a bank in case of default.
D)  interest-bearing debts.

Question 3

Banks that receive their charters from the federal government are called _______.

Accepted Answer

The answer of Banks that receive their charters from the...

Question 4

If a bank subject to a 20% required reserve ratio has $10,000 in excess reserves,it can extend,at a maximum,which quantity of new loans?

Accepted Answer

A)  $2,000
B)  $8,000
C)  $10,000
D)  $100,000

Question 5

Which statement is true?

Accepted Answer

A)  The most important job of the Federal Reserve is to control our money supply.
B)  Our currency is issued by the United States Treasury.
C)  There is a reserve requirement of 12% on all checking accounts.
D)  None of the statements are true.

Question 6

An individual bank may legally loan out an amount equal to its

Accepted Answer

A)  total net worth.
B)  total vault cash.
C)  total reserves.
D)  excess reserves.
E)  required reserves.

Question 7

All of the nation's financial institutions came under the jurisdiction of the Federal Reserve in

Accepted Answer

A)  1913.
B)  1933.
C)  1948.
D)  1980.

Question 8

When the Fed engages in a tight money policy,the price of government bonds tend to

Accepted Answer

A)  fall.
B)  rise.
C)  remain constant.
D)  move in the same direction as the bonds' market interest rate return.

Question 9

Secondary reserves consist of (1)________; (2)________; (3)_________;and (4)______.

Accepted Answer

Treasury bills;es;ce...

Question 10

The higher the price that must be paid to purchase a government bond,

Accepted Answer

A)  the lower will be the market rate of interest on that bond.
B)  the higher will be the market rate of interest on that bond.
C)  the greater will be the inflation rate.
D)  the lower will be the inflation rate.
E)  the greater is the demand for that bond.

Question 11

Demand deposits $200 million
Time deposits:
Original maturity (less than 18 months): $100 million
Original maturity (18 months or more): $400 million
Use the information above to find the bank's required reserves.

Accepted Answer

The answer of Demand deposits $200 million
Time deposits:
Original maturity (less...

Question 12

The reserve requirement ratio is equal to

Accepted Answer

A)  required reserves divided by excess reserves.
B)  legal required reserves times the deposit multiplier.
C)  total checkable deposits times the deposit multiplier.
D)  total checkable deposits times the excess reserve ratio.
E)  legal required reserves divided by total checkable deposits.

Question 13

If the Fed buys government securities from depository institutions,the effect will be to

Accepted Answer

A)  reduce loans and reduce the money supply.
B)  reduce loans and increase the money supply.
C)  increase loans and reduce the money supply.
D)  increase loans and increase the money supply.
E)  leave both the money supply and the loan balances unchanged.

Question 14

The difference between actual and required reserves is known as

Accepted Answer

A)  the required reserve ratio.
B)  fractional reserves.
C)  extra reserves.
D)  excess reserves.

Question 15

Actual reserves minus required reserves equals

Accepted Answer

A)  the required reserve ratio.
B)  actual reserves.
C)  vault cash plus deposits at Fed District Banks.
D)  excess reserves.

Question 16

If Mellon Bank has demand deposits of $6 billion and excess reserves of $50 million,and the reserve requirement is 10%,the bank's actual reserves are

Accepted Answer

A)  $550 million.
B)  $600 million.
C)  $650 million.
D)  $1 billion.
E)  $1.05 billion.

Question 17

When a person cashes a check drawn on her own account,the money supply _________.

Accepted Answer

The answer of When a person cashes a check drawn...

Question 18

Statement I: Before January,2008,banks had no incentive to hold excessive reserves.
Statement II: Actual reserves minus required reserves equals excess reserves.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.

Question 19

Suppose the required reserve ratio is 10% and a commercial bank has $2 million in checkable deposits appearing on the liability side of its balance sheet.How much vault cash does the bank have?

Accepted Answer

A)  $2 million
B)  $20,000
C)  $200,000
D)  Vault cash cannot be determined by the information given.

Question 20

A woman in Duluth,Minnesota,bought tickets to a Minnesota Vikings game.Her check was deposited in a bank in Minneapolis.From there it went directly to

Accepted Answer

A)  the Federal Reserve District Bank in Minneapolis.
B)  the Federal Reserve Bank in Washington,
C)  her bank in Duluth.
D)  C.

Exam 14: The Federal Reserve and Monetary Policy

When a person cashes a check drawn on her own account,the money supply _________.

Correct AnswerverifiedShow Answer

If a bank subject to a 20% required reserve ratio has $10,000 in excess reserves,it can extend,at a maximum,which quantity of new loans?

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All of the nation's financial institutions came under the jurisdiction of the Federal Reserve in

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Statement I: Before January,2008,banks had no incentive to hold excessive reserves. Statement II: Actual reserves minus required reserves equals excess reserves.

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Demand deposits $200 million Time deposits: Original maturity (less than 18 months): $100 million Original maturity (18 months or more): $400 million Use the information above to find the bank's required reserves.

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Secondary reserves are

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Which statement is true?

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Suppose the required reserve ratio is 10% and a commercial bank has $2 million in checkable deposits appearing on the liability side of its balance sheet.How much vault cash does the bank have?

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The difference between actual and required reserves is known as

Correct AnswerverifiedShow Answer

The reserve requirement ratio is equal to

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Secondary reserves consist of (1)________; (2)________; (3)_________;and (4)______.

Correct AnswerverifiedTreasury bills;es;ce...View AnswerShow Answer

Banks that receive their charters from the federal government are called _______.

Correct AnswerverifiedShow Answer

An individual bank may legally loan out an amount equal to its

Correct AnswerverifiedShow Answer

Actual reserves minus required reserves equals

Correct AnswerverifiedShow Answer

The higher the price that must be paid to purchase a government bond,

Correct AnswerverifiedShow Answer

A woman in Duluth,Minnesota,bought tickets to a Minnesota Vikings game.Her check was deposited in a bank in Minneapolis.From there it went directly to

Correct AnswerverifiedShow Answer

Commercial banks are required by law to hold reserves.These reserves are specified as percentages of a bank's

Correct AnswerverifiedShow Answer

If the Fed buys government securities from depository institutions,the effect will be to

Correct AnswerverifiedShow Answer

When the Fed engages in a tight money policy,the price of government bonds tend to

Correct AnswerverifiedShow Answer

If Mellon Bank has demand deposits of $6 billion and excess reserves of $50 million,and the reserve requirement is 10%,the bank's actual reserves are

Correct AnswerverifiedShow Answer

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Secondary reserves consist of (1)____; (2); (3)_;and (4)__.

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Treasury bills;es;ce...
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