Question 1

A bank's net worth is equal to its:

Accepted Answer

A)   Assets plus its liabilities
B)   Assets minus its liabilities
C)   Liabilities minus its assets
D)   Profits plus its assetsE) All of the above
F) A) and D)

Question 2

While the withdrawal of cash from banks does not affect money supply immediately, it will affect the banking system's lending capacity which will eventually lead to a contraction in money supply.

Accepted Answer

A) True 
 B)False

Question 3

A single commercial bank must meet a 25 percent reserve requirement. If it initially has no excess reserves and then $2,000 in cash is deposited in the bank, it can increase its loans by a maximum of:

Accepted Answer

A)   $2,000
B)   $1,500
C)   $1,250
D)   $1,750E) A) and B)
F) B) and D)

Question 4

Banks can lend their excess reserves to other banks in the:

Accepted Answer

A)   Mutual funds market
B)   Treasury funds market
C)   Federal funds market
D)   Bank funds marketE) B) and D)
F) All of the above

Question 5

The balance sheet below is for the First Federal Bank. Assume the required reserve ratio is 20 percent.  Refer to the above information. This bank can safely expand its loans by a maximum of:

Accepted Answer

A)   $20,000
B)   $40,000
C)   $100,000
D)   $200,000E) B) and C)
F) A) and D)

Question 6

When cash is deposited at a bank, the composition of the money supply is changed but the total supply of money is not.

Accepted Answer

A) True 
 B)False

Question 7

The Federal funds rate is the rate that banks pay for loans from:

Accepted Answer

A)   The Fed
B)   The U.S. Treasury
C)   Other banks
D)   Large CorporationsE) A) and C)
F) All of the above

Exam 15: Money Creation

While the withdrawal of cash from banks does not affect money supply immediately, it will affect the banking system's lending capacity which will eventually lead to a contraction in money supply.

Correct Answer
verified

The balance sheet below is for the First Federal Bank. Assume the required reserve ratio is 20 percent. Refer to the above information. This bank can safely expand its loans by a maximum of:

Correct Answer
verified

When cash is deposited at a bank, the composition of the money supply is changed but the total supply of money is not.

Correct Answer
verified

The Federal funds rate is the rate that banks pay for loans from:

Correct Answer
verified

A single commercial bank must meet a 25 percent reserve requirement. If it initially has no excess reserves and then $2,000 in cash is deposited in the bank, it can increase its loans by a maximum of:

Correct Answer
verified

Banks can lend their excess reserves to other banks in the:

Correct Answer
verified

A bank's net worth is equal to its:

Correct Answer
verified

Exam 15: Money Creation

While the withdrawal of cash from banks does not affect money supply immediately, it will affect the banking system's lending capacity which will eventually lead to a contraction in money supply.

Correct AnswerverifiedShow Answer

The balance sheet below is for the First Federal Bank. Assume the required reserve ratio is 20 percent. Refer to the above information. This bank can safely expand its loans by a maximum of:

Correct AnswerverifiedShow Answer

When cash is deposited at a bank, the composition of the money supply is changed but the total supply of money is not.

Correct AnswerverifiedShow Answer

The Federal funds rate is the rate that banks pay for loans from:

Correct AnswerverifiedShow Answer

A single commercial bank must meet a 25 percent reserve requirement. If it initially has no excess reserves and then $2,000 in cash is deposited in the bank, it can increase its loans by a maximum of:

Correct AnswerverifiedShow Answer

Banks can lend their excess reserves to other banks in the:

Correct AnswerverifiedShow Answer

A bank's net worth is equal to its:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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