Question

Question 1 (1 point)

The amount of reserves that a commercial bank is required to hold is equal to:

Question 1 options:

	the amount of its checkable deposits.
	the sum of its checkable deposits and time deposits.
	its checkable deposits multiplied by the reserve requirement.
	its checkable deposits divided by its total assets.

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Question 2 (1 point)

Answer the question on the basis of the following information for the Moolah Bank.



Refer to the information and assume that Moolah bank is "loaned up." If it receives a $100 deposit of currency, it could safely expand its loans by:

Question 2 options:

	$100.
	$90.
	$900.
	$1,000.

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Question 3 (1 point)

Most modern banking systems are based on:

Question 3 options:

	money of intrinsic value.
	commodity money.
	100 percent reserves.
	fractional reserves.

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Question 4 (1 point)

Which of the following statements is correct?

Question 4 options:

	The actual reserves of a commercial bank equal its excess reserves minus its required reserves.
	A bank's liabilities plus its net worth equal its assets.
	When borrowers repay bank loans, the supply of money increases.
	A single commercial bank can safely lend a multiple amount of its excess reserves.

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Question 5 (1 point)

The basic reason why the commercial banking system can increase its checkable deposits by a multiple of its excess reserves is that:

Question 5 options:

	reserves lost by any particular bank will be gained by some other bank.
	the central banks follow policies that prevent reserves from falling below the level required by law.
	the MPC of borrowers is greater than zero but less than 1.
	the banking system must keep reserves equal to 100 percent of its checkable-deposit liabilities.

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Question 6 (1 point)

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:

Question 6 options:

	m = E/D.
	D = E

Answer 1

The amount of reserves that a commercial bank is required to hold is equal to: A. the amount of its checkable deposits. B. its checkable deposits divided by its total assets. C. the sum of its checkable deposits and time deposits. D. its checkable deposits multiplied by the reserve requirement.

its checkable deposits multiplied by the reserve requirement.
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25. 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:

B. $90.--------------answer
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Most modern banking systems are based on fractional reserves.
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Which of the following statements is correct?
Actual reserves minus required reserves equal excess reserves
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The basic reason why the commercial banking system can increase its checkable deposits by a multiple of its excess reserves is that:

Question 5 options:
reserves lost by any particular bank will be gained by some other bank.
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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:
D. D = m/E.
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Overnight loans from one bank to another for reserve purposes entail an interest rate called the
Federal funds rate.
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bank panics
are a risk of fractional reserve banking, but are unlikely when banks are highly regulated and lend prudently.

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Answer 2