Homework Answers
Solution:
Bank use deposits to make loans
Answer is True
Depositors money are used by the banks to make loans. The amount of interest the banks collect on the loans is greater than the amount of interest they pay to customers with savings account which automatically leads to banks profit
According to the credit theory of banking: 1.banks create deposits when they make loans 2.banks receive...
According to the credit theory of banking: 1.banks create deposits when they make loans 2.banks receive deposits and multiply those deposits through the loan creation process 3.Central bank reserves' most important funtion is to meet reserve requirements 4.Banks can become insolvent by not making loans 5.Banks create loans and fund those loans through loans from the central bank What is answer?
1. Asset transformation and bank management True or False: All large banks and some small banks...
1. Asset transformation and bank management True or False: All large banks and some small banks chosen by the Federal Reserve perform asset transformation. True False Regardless of what size and form banks may be, they all operate under the same accounting rules and regulations. As such, we can use financial statements, especially balance sheets, as a guide when examining how banks are managed. Use the following categorization table to identify a bank's assets and liabilities. Assets Liabilities Demand deposits...
true or false the creation of transaction deposits via new loans is the same thing as...
true or false the creation of transaction deposits via new loans is the same thing as creating money
1. In the federal funds market, _____.? a. ?banks make loans to the Fed b. ?the...
1. In the federal funds market, _____.? a. ?banks make loans to the Fed b. ?the Fed makes short-term loans to private borrowers c. ?the Fed makes long-term loans to commercial banks d. ?banks make short-term loans to other banks e. ?banks make long-term loans to other banks 2. The table below shows the balance sheet of Countybank. If the required reserve ratio is 10 percent, this bank alone can now increase its lending by _____.? ? Table 14.2 ?...
How often do banks today hold loans that they make, for example, home mortgage loans under...
How often do banks today hold loans that they make, for example, home mortgage loans under the traditional "originate to hold" model of banking? Never, because it is not legal to do so Always, because the law required it Not often, because banks prefer to sell off the loans Most of the time. How did banks earn profits under the traditional "originate to hold" model of banking? Securitization of home loans Making loans and earning interest that was higher than...
Deposits of amounts payable to the federal government may be paid through federal depository banks. True...
Deposits of amounts payable to the federal government may be paid through federal depository banks. True or False True False Accrued vacation benefits are a form of estimated liability for an employer. True or False True False
1) Bank 1 has deposits of $4141 and reserves of $455. If the required reserve ratio...
1) Bank 1 has deposits of $4141 and reserves of $455. If the required reserve ratio is 10%, what is the value of the bank's excess reserves? Enter a whole number with no dollar sign. Round to the nearest whole number. 2) In a fractional reserve banking system a. banks hold a fraction of deposits as reserves. b. the reserve ratio measures the percentage of deposits available to be lent out. c. banks hold a fraction of reserves as deposits....
Lowering the discount rate will A. decrease reserves, encourage banks to make fewer loans, and increase...
Lowering the discount rate will A. decrease reserves, encourage banks to make fewer loans, and increase the money supply. B. increase reserves, encourage banks to make more loans, and increase the money supply. C. decrease reserves, encourage banks to make fewer loans, and decrease the money supply. D. increase reserves, encourage banks to make more loans, and decrease the money supply.
Suppose that the reserve requirement for checking deposits is 20 percent and that banks do not...
Suppose that the reserve requirement for checking deposits is 20 percent and that banks do not hold any excess reserves. If the Fed sells $3 million of government bonds, the economy’s reserves bymillion, and the money supply will bymillion. Now suppose the Fed lowers the reserve requirement to 15 percent, but banks choose to hold another 5 percent of deposits as excess reserves. True or False: The money multiplier will decrease. True False True or False: As a result, the...
A. Banks are not allowed to own stock. True False B. Banks are not allowed to...
A. Banks are not allowed to own stock. True False B. Banks are not allowed to own bonds. True False C. Banks are not allowed to underwrite credit default swaps. True False
1. Asset transformation and bank management True or False: All large banks and some small banks chosen by the Federal Reserve perform asset transformation. True False Regardless of what size and form banks may be, they all operate under the same accounting rules and regulations. As such, we can use financial statements, especially balance sheets, as a guide when examining how banks are managed. Use the following categorization table to identify a bank's assets and liabilities. Assets Liabilities Demand deposits...
Deposits of amounts payable to the federal government may be paid through federal depository banks. True or False True False Accrued vacation benefits are a form of estimated liability for an employer. True or False True False
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