Question : 51) What a bank run? A) A situation where a : 1384444

51) What is a bank run?

A) A situation where a commercial bank is holding zero reserves.

B) A panic situation where many depositors rush simultaneously to withdraw their deposit money in the form of cash.

C) A situation where all commercial banks in the system are simultaneously short of reserves.

D) The collapse of a non-commercial bank as a result of non-payment of loans.

E) The collapse of a commercial banks as a result of the devaluation of their assets.

52) Why is the possibility of a bank run extremely small in Canada today?

A) The Bank of Canada guarantees the deposits at all commercial banks in Canada, eliminating the danger of a rush of withdrawals.

B) The Department of Finance guarantees the deposits at all commercial banks in Canada, eliminating the danger of a rush of withdrawals.

C) The Canadian Deposit Insurance Corporation provides deposit insurance on eligible deposits, so most depositors would not feel the need to withdraw all of their money in a panic.

D) The Office of the Superintendent of Financial Institutions provides deposit insurance on eligible deposits, so most depositors would not feel the need to withdraw all of their money in a panic.

E) Industry Canada guarantees the deposits at all commercial banks in Canada, eliminating the danger of a rush of withdrawals.

53) Canadian commercial banks maintain their reserves in the form of

A) cash in their bank vaults and deposits at the Bank of Canada.

B) cash in their bank vaults.

C) gold in their bank vaults.

D) deposits at other commercial banks that are immediately accessible.

E) cash and foreign currency at the Bank of Canada.

54) A commercial bank’s actual reserve ratio is the

A) fraction of its deposit liabilities that it actually holds as reserves, either as cash or as deposits with the Bank of Canada.

B) fraction of its deposit liabilities that it actually holds as gold, other precious metal or cash in its own vaults.

C) fraction of its deposit liabilities that are backed by gold.

D) ratio of Canadian dollars to foreign currencies that it holds on its books.

E) ratio of chequable deposits to term deposits that it holds on its books.

55) “Excess reserves” for a commercial bank refer to

A) any surplus in the bank’s supply of gold.

B) any surplus of chequable deposits.

C) any reserves (cash or deposits with the Bank of Canada) that the bank holds over and above its desired reserves.

D) reserves (cash or deposits with the Bank of Canada) that the Bank of Canada requires the bank to hold.

E) excess demand for money from that bank.

56) Consider a new deposit of $10 000 to the Canadian banking system. The bank that initially receives this deposit will find itself with

A) no excess reserves if there is no reserve requirement.

B) $1000 of excess cash reserves if its target reserve ratio is 10%.

C) $2000 of excess cash reserves if its target reserve ratio is 10%.

D) $8000 of excess cash reserves if its target reserve ratio is 20%.

E) $10 000 of excess cash reserves if its target reserve ratio is 100%.

57) A commercial bank’s target reserve ratio is the

A) fraction of its deposit liabilities that it wishes to holds as reserves, either as cash or as deposits with the Bank of Canada.

B) fraction of its deposit liabilities that it actually holds as cash in its own vaults.

C) fraction of its deposit liabilities that are backed by gold.

D) ratio of Canadian dollars to foreign currencies that the bank holds on its books.

E) ratio of chequable deposits to term deposits that the bank holds on its books.

58) If all the commercial banks in the banking system collectively have $300 million in cash reserves and are satisfying their target reserve ratio of 20%, what is the amount of deposits they have?

A) $0

B) $60 million

C) $600 million

D) $1500 million

E) $2000 million

59) Which of the following statements about reserve ratios at Canadian commercial banks is true? Commercial banks in Canada

A) are required by the Bank Act to hold required reserves.

B) have a reserve ratio of zero.

C) have a reserve ratio of 100%.

D) have a positive reserve ratio.

E) never have excess reserves.

60) Without a central bank, commercial banks in Canada would probably hold ________ reserves than they do now, resulting in a ________ money supply than at present.

A) the same; the same

B) more; larger

C) more; smaller

D) less; smaller

E) less; larger