Chapter 15 – Money Creation
55. Refer to the above data. 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:
56. When a bank has a check drawn and cleared against it:
57. Suppose a credit union has checkable deposits of $500,000 and the legal reserve ratio is
10 percent. If the institution has excess reserves of $4,000, then its actual reserves are:
Chapter 15 – Money Creation
58. When commercial banks use excess reserves to buy government securities from the
public:
59. Which of the following would reduce the money supply?
60. Overnight loans from one bank to another for reserve purposes entail an interest rate
called the:
Chapter 15 – Money Creation
61. A bank temporarily short of required reserves may be able to remedy this situation by:
62. The market for immediately available reserve balances at the Federal Reserve is known as
the:
63. The Federal funds market is the market in which:
Chapter 15 – Money Creation
64. The multiple by which the commercial banking system can expand the supply of money is
equal to the reciprocal of:
65. The multiple by which the commercial banking system can expand the supply of money
on the basis of excess reserves:
66. The multiple by which the commercial banking system can increase the supply of money
on the basis of each dollar of excess reserves is equal to:
Chapter 15 – Money Creation
67. If m equals the maximum number of new dollars that can be created for a single dollar of
excess reserves and R equals the required reserve ratio, then for the banking system:
68. If D equals the maximum amount of new demand-deposit money that can be created by
the banking system on the basis of any given amount of excess reserves; E equals the amount
of excess reserves; and m is the monetary multiplier, then:
69. If the reserve ratio is 15 percent and commercial bankers decide to hold additional excess
reserves equal to 5 percent of any newly acquired checkable deposits, then the relevant
monetary multiplier for the banking system will be:
Chapter 15 – Money Creation
70. Other things equal, if the required reserve ratio was lowered:
71. Suppose a commercial banking system has $100,000 of outstanding checkable deposits
and actual reserves of $35,000. If the reserve ratio is 20 percent, the banking system can
72. If a portion of the loans extended by commercial banks is taken as cash rather than as
checkable deposits, the maximum money-creating potential of the commercial banking
system will:
Chapter 15 – Money Creation
73. The basic reason why the commercial banking system can increase its checkable deposits
by a multiple of its excess reserves is that:
Answer the question on the basis of the following consolidated balance sheet for the
commercial banking system. Assume the required reserve ratio is 30 percent. All figures are
in billions.
74. Refer to the above data. The commercial banking system has excess reserves of:
Chapter 15 – Money Creation
75. Refer to the above data. The maximum amount by which the commercial banking system
can expand the supply of money by lending is:
76. Refer to the above data. If the commercial banking system actually loans the maximum
amount it is able to lend:
77. Given a 25 percent reserve ratio, assume the commercial banking system is loaned up.
Now assume the reserve ratio is reduced to 20 percent. As a result of this reduction:
Chapter 15 – Money Creation
Answer the question on the basis of the following consolidated balance sheet for the
commercial banking system. Assume the required reserve ratio is 10 percent. All figures are
in billions.
78. Refer to the above data. The commercial banking system has excess reserves of:
79. Refer to the above data. After a deposit of $10 billion of new currency into a checking
account in the banking system, excess reserves will increase by:
Chapter 15 – Money Creation
80. Refer to the above data. After the deposit of $10 billion of new currency, the maximum
amount by which this commercial banking system can expand the supply of money by
lending is:
Answer the question on the basis of the following information about a banking system: new
currency deposited in the system = $40 billion; legal reserve ratio = 0.20; excess reserves
prior to the currency deposit = $0.
81. Refer to the above information. The $40 billion deposit of currency into checking
accounts will initially create:
Chapter 15 – Money Creation
82. Refer to the above information. The $40 billion deposit of currency into checking
accounts will create excess reserves of:
83. Refer to the above information. With the $40 billion deposit, the banking system will be
able to expand the money supply through loans by:
84. Refer to the above information. The $40 billion deposit of new currency will support total
checkable deposits of:
Chapter 15 – Money Creation
Answer the question on the basis of the following table for a commercial bank or thrift:
85. Refer to the above table. When the legal reserve ratio is 25 percent, the excess reserves of
this single bank are:
86. Refer to the above table. When the legal reserve ratio is 10 percent, the money creating
potential of this single bank is: