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Exam 15: Money Creation

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Question 131

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$\begin{array} { | l | c | } \hline \text { Reserves } & \$ 100 \\\hline \text { Checkable Deposits } & 1,000 \\\hline \text { Loans (to customers) } & 300 \\\hline \text { Property } & 400 \\\hline \text { Securities (owned) } & 300 \\\hline \text { Stock Shares } & 100 \\\hline\end{array}$ Refer to the accompanying table of information for the Moolah Bank. If Moolah Bank is legally "loaned up," the banking system's monetary multiplier must be

A) 5.
B) 8.
C) 10.
D) 20.

E) A) and B)
F) A) and D)

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Question 132

Multiple Choice

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A bank's net worth is equal to its

A) assets plus its liabilities.
B) assets minus its liabilities.
C) liabilities minus its assets.
D) profits plus its assets.

E) A) and B)
F) A) and C)

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Question 133

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$\begin{array} { | l | r | l | l | } \hline & & \text { Assets } & \text { Liabilities and Net Worth } \\\hline \text { Stock Shares } & \$ 400 & & \\\hline \text { Reserves } & 40 & & \\\hline \text { Property } & 300 & & \\\hline \text { Securities } & 160 & & \\\hline \text { Loans } & 80 & & \\\hline \text { Demand Deposits } & 180 & & \\\hline\end{array}$ The ?gures in the table are for a single commercial bank. All ?gures are in thousands of dollars. This bank has total assets of

How does the reserve requirement change for banks and thrifts as the size of the bank changes?

The banking system can lend by a multiple of its excess reserves because lending does not result in a loss of reserves to the banking system as a whole.

The fact that reserves lost by any particular bank will be gained by some other bank explains why the commercial banking system

Refer to the accompanying balance sheet for the First National Bank of Bunco. All figures are in millions. Suppose that this bank currently has $6 million in excess reserves and that customers of this bank collectively write checks For cash at the bank in the amount of $6 million. As a result, the bank's excess reserves diminish to

The last transaction in the federal funds market occurred in 2008 because

Sharon sells a government security worth $4,600,000 to the Federal Reserve Bank of Kansas City. She then deposits the funds in her checking account at First Commerce Bank. Her checking account had a $150,000 Balance before this deposit. The reserves of First Commerce Bank would

If Bank A has excess reserves of $1 million and all other banks in the system do not have any excess reserves, then the amount of additional loans that can be made by the banking system will be

$\begin{array} { | c | c | c | } \hline \text { (1) } & ( 2 ) & ( 3 ) \\\hline \text { Legal Reserve Ratio (\%) } & \text { Checkable Deposits } & \text { Actual Reserves } \\\hline 10 & \$ 40,000 & \$ 10,000 \\\hline 20 & 40,000 & 10,000 \\\hline 25 & 40,000 & 10,000 \\\hline 30 & 40,000 & 10,000 \\\hline\end{array}$ The accompanying table gives data for a commercial bank or thrift. When the legal reserve ratio is 20 percent, the money-creating potential of the entire banking system is

When cash is withdrawn from a checkable-deposit account at a bank,

Commercial bank reserves are an asset to commercial banks but a liability to the Federal Reserve Bank holding them.

What are the major assets and the major claims (liabilities) on a commercial bank's balance sheet?

Refer to the accompanying balance sheet for the ABC National Bank. Assume the required reserve ratio is 20 percent. If the original balance sheet was for the commercial banking system, rather than a single bank, loans and Checkable deposits could have been expanded by a maximum of

One way to enhance the stability of the banking system is to

Since 2009, how much has been borrowed through the federal funds market?

When a check is drawn and cleared, the

(Last Word) How is the term "leverage" used in finance? Do modern banks use leverage?

Cash held by a bank in its vault is a part of the bank's