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5 Written questions

5 Matching questions

  1. Money creation occurs when
  2. 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:
  3. When an individual deposits cash or coins in a transactions account, there is
  4. If excess reserves are $30,000, demand deposits are $500,000 and the minimum reserve requirement is 10 percent, then total reserves are:
  5. The total quantity of output demanded at alternative price levels in a given time period, ceteris paribus is the definition of:
  1. a Aggregate demand
  2. b $80,000
  3. c Banks make loans to borrowers
  4. d A change in the composition of the money supply, but not the size
  5. e Fractional reserves

5 Multiple choice questions

  1. The decision by the Federal Reserve to reduce the minimum reserve requirement
  2. An increase in the money multiplier
  3. The money supply becomes smaller
  4. $20,000
  5. Bank reserves

5 True/False questions

  1. Money is functioning as a medium of exchange when you:Buy lunch at a fast food restaurant for yourself and your friend


  2. If there is no minimum reserve requirement in the banking system, the potential ability of banks to create money isUnlimited


  3. 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:


  4. The reserve ratio is the ratio of:Reserves being a fraction of total deposits


  5. The smallest component of the basic money supply is in the form ofTraveler's checks