Question

DJ. It has $559 in reserves and $9445 in loans. ? 2. The ability of banks to create money has its source in which of the following A. the 100 percent reserve requirement B. fractional-reserve banking (i.e. less than 100 percent reserve requirement) C. the ability of the government to mint as much currency as it wishes D. the banks' ability to issue currency (bank notes) of their own ? 3. Which of the following items is a liability to a bank A. loans B. reserves C. deposits D. an interest-bearing asset owned by the bank 4. Other things being equal, when the Federal Reserve Bank cuts its discount rate, which of the following is likely to occur ? A. The money supply tends to fall. B. Bank reserves tend to fall. C. Bank lending tends to fall. D. The money supply tends to rise 5. When the Federal Reserve conducts open market sales, what effect does it have on the money Supply ? A. It increases the money supply. B. It decreases the money supply. C. There is a gradual change to the money supply. D. There is no change to the money supply. 6. First National Bank has assets of $500,000 and liabilities of $400,000. First National Bank's equality (net capital) is A S900.000 Focus ates) MacBook Pro 20 *

Answer 1

2 B) A fractional reserve banking. Only if it is fractional, multiplier would work.

3 C) Deposits. Deposits are other's asset which the bank has to pay back whenever demanded.

4 ) When the Fed cuts its discount rate, it is a contractionary monetary policy. Hence, the money supply falls.(A)

5 ) Sales in open market increases liquidity in the market and hence money supply increases.(A)