Chapter 15 – Money Creation
58. The relative importance of various asset items on a commercial bank’s balance sheet
reflects a bank’s pursuit of which two conflicting goals?
59. 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:
60. If the reserve ratio is 25 percent, what level of excess reserves does a bank acquire when a
customer deposits a $12,000 check drawn on another bank?
Chapter 15 – Money Creation
61. In an unregulated environment, the commercial banking system would tend to vary the
supply of money in a way that:
62. The basic purpose of imposing legal reserve requirements on commercial banks is to:
63. A bank can get additional excess reserves by doing any of the following, except:
Chapter 15 – Money Creation
64. Banks can lend their excess reserves to other banks in the:
65. In the Federal funds market, a bank that needs to meet reserve requirements can borrow
reserves, usually for a period:
66. The Federal funds rate is the rate that banks pay for loans from:
Chapter 15 – Money Creation
67. A commercial bank sells a $10,000 government bond to a securities dealer. The dealer
pays for the bond in cash, which the bank adds to its vault cash. The money supply has:
68. If the Federal Reserve System sells $5 billion of government securities to commercial
banks, the banks’ reserves would:
69. The fact that reserves lost by any particular bank will be gained by some other bank
explains why the commercial banking system:
Chapter 15 – Money Creation
70. The commercial banking system can lend by a multiple of its excess reserves primarily
because:
71. When people withdraw money from their deposits in the banking system, the:
72. Assume the required reserve ratio is 16.67 percent and that the commercial banking
system has $110 million in excess reserves. The maximum amount of new money which the
banking system could create is:
Chapter 15 – Money Creation
73. If the required reserve ratio is 20 percent and commercial bankers decide to hold
additional excess reserves equal to 5 percent of any newly acquired checkable deposits, then
the effective monetary multiplier for the banking system will be:
74. Maximum checkable-deposit expansion in the banking system is equal to:
75. The multiple by which the commercial banking system can expand the supply of money is
equal to:
Chapter 15 – Money Creation
76. If the monetary multiplier is 6, then the reserve ratio must be:
77. A commercial bank has checkable-deposit liabilities of $500,000, reserves of $150,000,
and a required reserve ratio of 20 percent. The amount by which a single commercial bank
and the amount by which the banking system can increase loans are respectively:
78. If the required reserve ratio were 15 percent, the value of the monetary multiplier would
be:
Chapter 15 – Money Creation
79. The commercial banking system has excess reserves of $200,000. Then new loans of
$800,000 are subsequently made, and the system ends up just meeting its reserve
requirements. The required reserve ratio must be:
80. The commercial banking system, because of a recent change in the required reserve ratio
from 8 percent to 10 percent, finds that it is $50 million short of reserves. If it is unable to
obtain any additional reserves, it must reduce deposits and money supply by:
81. Only one commercial bank in the banking system has an excess reserve, and its excess
reserve is $400,000. This bank makes a new loan of $300,000 and keeps an excess reserve of
$100,000. If the required reserve ratio for all banks is 12.5 percent, the potential expansion of
the money supply from this new loan is:
Chapter 15 – Money Creation
82. When bankers hold excess reserves:
Answer the question based on the following balance sheet for the First National Bank.
Assume the reserve ratio is 15 percent
83. Refer to the above data. This bank can make new loans of up to:
Chapter 15 – Money Creation
84. Refer to the above data. If a check for $14,000 is drawn and cleared against this bank, its
reserves and checkable deposits will be, respectively:
85. Refer to the above data. If a check for $20,000 is drawn and cleared against this bank, it
will then have excess reserves of:
86. Refer to the above data. If the original balance sheet was for the commercial banking
system, rather than a single bank, loans and deposits could have been expanded by a
maximum of approximately:
Chapter 15 – Money Creation
Answer the question based on the following consolidated balance sheet for the commercial
banking system. Assume the required reserve ratio is 12 percent. All figures are in billions of
dollars
87. Refer to the above data. The commercial banking system has excess reserves of:
88. Refer to the above data. The maximum amount by which the commercial banking system
can expand the supply of money by lending is:
Chapter 15 – Money Creation
89. Refer to the above data. If the commercial banking system actually loans out the
maximum amount it is able to lend, excess reserves will fall:
90. Refer to the above data. The claims of owners in the commercial banking system are equal
to:
91. Refer to the above data. If commercial bankers decide to hold additional excess reserves
equal to 7 percent of any newly acquired checkable deposits, then the relevant monetary
multiplier for this banking system will be: