Question : 61) Commercial banks hold a fraction of their deposits in : 1384445

 

61) Commercial banks hold a fraction of their deposits in cash in their vaults (or as deposits with the central bank). This fraction is known as

A) the required reserve.

B) the excess reserve ratio.

C) the fractional reserve.

D) the reserve ratio.

E) the target reserve.

62) The Canadian banking system is a

A) gold-reserve system.

B) fractional-reserve system.

C) target-reserve system.

D) asset-backed reserve system.

E) treasury-bill reserve system.

63) Suppose a commercial bank has a level of target reserves of $500 million and actual reserves of $575 million. This bank’s ________ is/are $75 million.

A) profits

B) fractional reserves

C) excess reserves

D) reserve ratio

E) cash drain

64) Suppose a commercial bank has a target reserve ratio of 1%, but has an actual reserve ratio of 0.8%. This bank will likely

A) expand its portfolio of loans.

B) contract its portfolio of loans.

C) maintain its new, higher reserve ratio because it is more profitable.

D) buy government securities from the Bank of Canada.

E) allow fewer cash withdrawals by the bank’s customers.

65) Suppose Bank ABC has a target reserve ratio of 10%. If Bank ABC receives a new deposit of $100 000 it will immediately find itself with

A) no excess cash reserves.

B) excess cash reserves of $10 000.

C) excess cash reserves of $90 000.

D) excess cash reserves of $100 000.

E) excess cash reserves equal to 10% of its deposits.

66) Suppose Bank ABC has a target reserve ratio of 2%. If Bank ABC receives a new deposit of $50 million it will immediately find itself with

A) no excess cash reserves.

B) excess cash reserves of $1 million.

C) excess cash reserves of $10 million.

D) excess cash reserves of $49 million.

E) excess cash reserves of $49.5 million.

67) Suppose the Canadian banking system jointly has $20 million in reserves (cash and deposits at the Bank of Canada), all banks have a target reserve ratio of 20%, and there are no excess reserves. What is the amount of deposits in the banking system?

A) $4 million

B) $40 million

C) $80 million

D) $100 million

E) $120 million

68) A central bank can “create” money by

A) selling some of its foreign-currency reserves for domestic currency.

B) selling government Treasury bills to the commercial banks.

C) increasing the rate of inflation.

D) issuing its own Central Bank bonds.

E) purchasing government securities on the open market.

69) Which of the following examples constitutes a new deposit to the Canadian commercial banking system?

A) an individual transfers money from ShipShape Credit Union to Scotiabank

B) an individual immigrates to Canada and deposits money from abroad

C) an individual puts cash in a safety-deposit box

D) the Bank of Canada sells government securities to an individual or a firm

E) the Bank of Canada buys foreign currency from abroad

70) A new deposit to the banking system can result when

A) an individual stashes cash in a mattress.

B) a new immigrant to Canada sends cash to his or her home country.

C) the Bank of Canada sells a government security to a firm which then maintains the asset in a bank.

D) the Bank of Canada buys a government security from a firm, which keeps the proceeds from the sale in a company vault.

E) the Bank of Canada buys a government security from a firm, which then deposits the proceeds from the sale in its account at a commercial bank.

 

 

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