Question : 61) At any point in time, a single bank can : 1227829

 

 

61) At any point in time, a single bank can loan an amount equal to

A) its excess reserves.

B) its required reserves.

C) its government securities.

D) the amount of loans the bank made in the past.

E) its total reserves.

Answer:  A

Topic:  Money creation process

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.4

Status:  TPS

 

62) Assume First Central Bank has a desired reserve ratio of 15 percent; $80,000 in total deposits, loans equal to $60,000, and has $20,000 in actual reserves. First Central can make additional loans totaling

A) $8,000.

B) $12,000.

C) $20,000.

D) $60,000.

E) $80,000.

Answer:  A

Topic:  Money creation process

Skill:  Level 3: Using models

Section:  Checkpoint 11.4

Status:  TPS

63) Bank One has reserves of $100,000, government securities of $200,000, loans of $700,000, and checkable deposits of $800,000. If the desired reserve ratio is 10 percent, Bank One can make additional loans totaling

A) $0.00.

B) $10,000.

C) $20,000.

D) $80,000.

E) $100,000.

Answer:  C

Topic:  Money creation process

Skill:  Level 3: Using models

Section:  Checkpoint 11.4

Status:  CT

 

64) A new bank has reserves of $600,000, checkable deposits of $500,000, and government securities of $100,000. If the desired reserve ratio is 10 percent, the amount of loans this bank can make is

A) $50,000.

B) $60,000.

C) $540,000.

D) $550,000.

E) $600,000.

Answer:  D

Topic:  Money creation process

Skill:  Level 3: Using models

Section:  Checkpoint 11.4

Status:  CT

 

65) If a single bank has $25,000 in excess reserves and the desired reserve ratio is 20 percent, what is the maximum this bank can loan?

A) $5,000

B) $20,000

C) $25,000

D) $125,000

E) $30,000

Answer:  C

Topic:  Money creation process

Skill:  Level 3: Using models

Section:  Checkpoint 11.4

Status:  TPS

66) A-1 bank initially has no excess reserves. If the desired reserve ratio is 10 percent and a new deposit of $10,000 is made in A-1, then A-1

A) is required to hold the deposit in its reserves.

B) can immediately loan a multiple of the $10,000.

C) can immediately loan $9,000.

D) can immediately loan $100,000.

E) can immediately loan $10,000.

Answer:  C

Topic:  Money creation process

Skill:  Level 3: Using models

Section:  Checkpoint 11.4

Status:  WM

 

67) A currency drain is

A) an increase in currency held outside banks.

B) when the Fed buys securities but it is not when the Fed sells securities.

C) when the Fed sells securities but it is not when the Fed buys securities.

D) when the Fed either buys or sells securities.

E) when the Fed raises the required reserve ratio.

Answer:  A

Topic:  Currency drain

Skill:  Level 1: Definition

Section:  Checkpoint 11.4

Status:  WM

 

68) A currency drain occurs when the

A) Fed increases the required reserve ratio.

B) Fed sells U.S. government securities.

C) non-bank public increases its holdings of currency outside the banking system.

D) banks reduce the number of loans they create with their excess reserves.

E) Fed buys U.S. government securities.

Answer:  C

Topic:  Currency drain

Skill:  Level 1: Definition

Section:  Checkpoint 11.4

Status:  CT

 

69) The currency drain reduces the amount of

A) reserves available to banks to make loans.

B) currency the Fed has outstanding in the economy.

C) currency available for banks to borrow from the Fed.

D) the monetary base.

E) open market operations the Fed can make.

Answer:  A

Topic:  Currency drain

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.4

Status:  CT

70) Suppose the Federal Reserve buys $50 million worth of securities from a commercial bank. As a result, the monetary base ________, and the quantity of money will ________ $50 million due to the ________.

A)  increases; increase by more than; money multiplier

B)  decreases; decrease by more than; money multiplier

C)  increases; increase by more than; expenditure multiplier

D) decreases; decrease by less than; expenditure multiplier

E) increases; decrease by; currency drain

Answer:  A

Topic:  Money multiplier

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.4

Status:  CD new