Chapter 15 – Money Creation
87. Refer to the above table. When the legal reserve ratio is 20 percent, the money creating
potential of the entire banking system is:
88. Refer to the above table. When the legal reserve ratio is 30 percent, the monetary
multiplier is:
89. Refer to the above table. If the legal reserve ratio falls from 25 percent to 10 percent,
excess reserves of this single bank will:
Chapter 15 – Money Creation
90. If actual reserves in the banking system are $8,000, checkable deposits are $70,000, and
the legal reserve ratio is 10 percent, then excess reserves are:
91. If actual reserves in the banking system are $40,000, excess reserves are $10,000, and
checkable deposits are $240,000, then the legal reserve requirement is:
92. If actual reserves in the banking system are $50,000, excess reserves are $5,000, and
checkable deposits are $225,000, then the monetary multiplier is:
Chapter 15 – Money Creation
93. If the monetary authorities want to reduce the monetary multiplier, they should:
94. If the reserve ratio is 100 percent, the value of the monetary multiplier is:
95. The greater the required reserve ratio, the:
Chapter 15 – Money Creation
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96. Money is destroyed when:
97. When a bank loan is repaid the supply of money:
Answer the question on the basis of the following information for the Moolah Bank.
Chapter 15 – Money Creation
98. Assume that the listed amounts constitute this bank’s complete set of accounts. Moolah’s:
99. Assume that the listed amounts constitute this bank’s complete set of accounts. Moolah’s:
100. Assume that the listed amounts constitute this bank’s complete set of accounts.
Moolah’s:
Chapter 15 – Money Creation
101. Refer to the above information. If Moolah Bank is legally “loaned up,” the reserve
requirement must be:
102. Refer to the above information. If Moolah Bank is legally “loaned up,” the banking
system’s monetary multiplier must be:
103. Refer to the above information and assume that Moolah bank is “loaned up.” If it
receives a $100 deposit of currency, it could safely expand its loans by:
Chapter 15 – Money Creation
104. Refer to the above information and assume that Moolah Bank is “loaned up.” If it
receives a $100 deposit of currency, the banking system of which Moolah is a part could
expand loans by:
105. (Last Word) Which of the following resulted from the financial crisis of 2007-2008?
106. (Last Word) A “national bank holiday” that closed all banks for a week and resulted in
Federal deposit insurance occurred in the United States in:
Chapter 15 – Money Creation
107. (Last Word) Which of the following represents a change in today’s banking policies that
should prevent a recurrence of the bank panics of 1930-1933?
108. (Last Word) The bank panics of 1930-1933 and the resulting failures of many banks
were caused by:
109. Excess reserves are the amount by which required reserves exceed actual reserves.
Chapter 15 – Money Creation
110. Actual reserves equal required reserves plus excess reserves.
111. Commercial bank reserves are an asset to commercial banks but a liability to the Federal
Reserve Bank holding them.
112. Balance sheets always balance because reserves must always equal liabilities plus net
worth.
113. Loans made to customers are a liability on a bank’s balance sheet.
Chapter 15 – Money Creation
114. Checkable deposits are a liability on a bank’s balance sheet.
115. The supply of money increases when the public buys government securities from
commercial banks.
116. Commercial banks increase the supply of money when they purchase either personal
IOU’s or government bonds from businesses and households.
117. When commercial banks retire outstanding loans, the supply of money is increased.
Chapter 15 – Money Creation
118. Commercial banks monetize claims when they sell securities to Federal Reserve Banks.
119. 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.
120. The monetary multiplier and the spending multiplier are two ways of referring to the
same concept.
121. In an uncontrolled or unregulated system commercial bank lending will tend to intensify
the business cycle.
Chapter 15 – Money Creation
122. An individual bank can safely lend out a multiple of its excess reserves, but the banking
system can safely lend out only an amount equal to the excess reserves in the banking
system.
123. If the reserve requirement is 20 percent, the monetary multiplier will be 4.
124. The higher the reserve requirement, the lower is the monetary multiplier.