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5 Written Questions

5 Matching Questions

  1. If money is used to transform current income into future purchases, it is functioning as a:
  2. Initially a bank has a minimum reserve requirement of 15 percent and no excess reserves. If $200,000 is deposited in the bank, then ceteris paribus:
  3. Which of the following does not constrain deposit creation?
  4. If total reserves for a bank are $25,000, excess reserves are zero and demand deposits are $100,000, then the money multiplier must be:
  5. Use the following balance sheet for Bank of the Universe, which is one of many banks in a banking system.
    Table 13.2—Bank of the Universe Balance Sheet

    Refer to Table 13.2. With a required reserve ratio of 10 percent, Bank of the Universe can make new loans in the amount of:
  1. a The decision by the Federal Reserve to reduce the minimum reserve requirement
  2. b Store of value
  3. c Excess reserves will increase by $170,000
  4. d 4.00
  5. e $50,000

5 Multiple Choice Questions

  1. Transactions accounts and currency in circulation
  2. $100,000
  3. Buy lunch at a fast food restaurant for yourself and your friend
  4. $200,000
  5. Pools of money used to buy interest-bearing bonds

5 True/False Questions

  1. If you deposit $1,000 in your checking account, your bank is only required to hold a portion of the deposit and is allowed to lend out the balance. This illustrates the concept known as:Fractional reserves


  2. When an individual deposits cash or coins in a transactions account, there isA change in the composition of the money supply, but not the size


  3. Ceteris paribus, if Tamika pays off a loan at the bank then over time:An individual repays the money that he borrowed from a bank


  4. The basic money supply includesIt creates a transactions-account balance for the borrower


  5. Suppose the entire banking system has $70,000 in excess reserves and a required reserve ratio of 25 percent. The deposit-creation potential of the banking system is$280,000


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