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The fractional reserve system of banking started when goldsmiths began:

Issuing paper receipts in excess of the amount of gold held

A bank owns a 10-story office building. In the bank's balance sheet, this would be listed as part of:

Assets

A bank has $2 million in checkable deposits. In the bank's balance sheet, this would be part of:

Liabilities

The reserve ratio is equal to:

A commercial bank's required reserves divided by its checkable-deposit liabilities

A bank's required reserves can be calculated by:

Multiplying its checkable-deposit liabilities by the reserve ratio

A commercial bank's checkable-deposit liabilities can be estimated by:

Dividing its required reserves by the reserve ratio

A commercial bank has required reserves of $6,000 and the reserve ratio is 20 percent. How much are the commercial bank's checkable-deposit liabilities?

$30,000

A commercial bank has checkable-deposit liabilities of $50,000 and a reserve ratio of 20 percent. What is the amount of required reserves?

$10,000

A bank is in the position to make loans when required reserves:

Are less than actual reserves

An individual deposits $12,000 in a commercial bank. The bank is required to hold 10 percent of all deposits on reserve at the regional Federal Reserve Bank. The deposit increases the loan capacity of the bank by:

10,800

A bank's checkable deposits shrink from $40 million to $33 million. What happens to its required reserves if the reserve ratio is 3%?

They fall by about $0.2 million

When loans are repaid at commercial banks:

Money is destroyed

Which of the following statements is correct?

A bank can only grant loans to customers if it has excess reserves

Money is "created" when:

People receive loans from their banks

Other things being equal, an expansion of commercial bank lending:

Increases the money supply

The primary reason commercial banks must keep required reserves on deposit at Fed is to:

Allow the Fed to control the amount of bank lending

The relative importance of various asset items on a commercial bank's balance sheet reflects a bank's pursuit of which two conflicting goals?

Liquidity and profits

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:

$1,500

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?

$9,000

The basic purpose of imposing legal reserve requirements on commercial banks is to:

Provide a device through which the credit-creating activities of banks can be controlled

Banks can lend their excess reserves to other banks in the:

Federal funds market

In the Federal funds market, a bank that needs to meet reserve requirements can borrow reserves, usually for a period:

Overnight

The Federal funds rate is the rate that banks pay for loans from:

Other banks

If the Federal Reserve System sells $5 billion of government securities to commercial banks, the banks' reserves would:

Decrease by $5 billion

When people withdraw money from their deposits in the banking system, the:

Excess reserves of the banking system will decrease

Maximum checkable-deposit expansion in the banking system is equal to:

Excess reserves times the monetary multiplier

The multiple by which the commercial banking system can expand the supply of money is equal to:

The reciprocal of the reserve ratio

If the monetary multiplier is 6, then the reserve ratio must be:

0.167

If the required reserve ratio were 15 percent, the value of the monetary multiplier would be:

6.67

When bankers hold excess reserves:

The money-creating potential of the banking system decreases

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