Question : 31) The required reserve ratio 10 percent and Charlie deposits : 1227820

 

 

31) The required reserve ratio is 10 percent and Charlie deposits $3,000 in her checking account. The bank must

A) increase reserves by $3,000.

B) increase reserves by $300.

C) decrease reserves by $3,000.

D) decrease reserves by $300.

E) not change its reserves until Charlie decides to withdraw her funds.

Answer:  B

Topic:  Fed policy tools, required reserve ratio

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.3

Status:  CD new

 

32) The required reserve ratio is the minimum percentage of ________ that banks are required to hold by regulation.

A) reserves as total assets

B) deposits as total assets

C) reserves as deposits

D) deposits as reserves

E) reserves as total liabilities

Answer:  D

Topic:  Fed policy tools, required reserve ratio

Skill:  Level 1: Definition

Section:  Checkpoint 11.3

Status:  CT

33) The required reserve ratio is the

A) amount of excess reserves the bank holds just in case.

B) total amount of reserves the bank holds in its vaults.

C) total amount of reserves the bank holds at the Fed.

D) amount of reserves banks are required by the Fed to be held as a percentage of the bank’s deposits.

E) amount of reserves banks are required by the Fed to be held as a percentage of the bank’s loans.

Answer:  D

Topic:  Fed policy tools, required reserve ratio

Skill:  Level 1: Definition

Section:  Checkpoint 11.3

Status:  WM

 

34) Which of the following statements is correct?

A) required reserves = (total deposits) × (excess reserve ratio)

B) required reserves = (total reserves) × (excess reserve ratio)

C) required reserves = (total deposits) × (required reserve ratio)

D) required reserves = (total deposits) ÷ (required reserve ratio)

E) required reserves = (total deposits) × (required reserve ratio) – excess reserves

Answer:  C

Topic:  Fed policy tools, required reserve ratio

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.3

Status:  AA

 

35) The interest rate the Federal Reserve charges a bank when it borrows reserves from the Fed is called the

A) market interest rate.

B) federal funds rate.

C) discount rate.

D) prime rate.

E) borrowing rate.

Answer:  C

Topic:  Fed policy tools, discount rate

Skill:  Level 1: Definition

Section:  Checkpoint 11.3

Status:  CT

36) The discount rate is the

A) banks’ real interest rate.

B) interest rate at which the Fed will loan reserves to commercial banks.

C) interest rate banks charge the Fed when the Fed borrows from the banks.

D) name of the interest rate banks charge their most credit-worthy borrowers.

E) the interest rate paid on U.S. government securities.

Answer:  B

Topic:  Fed policy tools, discount rate

Skill:  Level 1: Definition

Section:  Checkpoint 11.3

Status:  WM

 

37) The discount rate is the

A) interest rate paid when a bank borrows reserves from another bank.

B) interest rate paid when a commercial bank borrows reserves from the Fed.

C) reduction in the interest rate given to the bank’s best customers.

D) another name for the long-term interest rate.

E) interest rate the Fed pays banks for the reserves the banks keep at the Fed.

Answer:  B

Topic:  Fed policy tools, discount rate

Skill:  Level 1: Definition

Section:  Checkpoint 11.3

Status:  NAU

 

38) The discount rate is

A) the interest rate that commercial banks have to pay for any reserves that they borrow from the non-bank public.

B) the interest rate that commercial banks have to pay to the owners of bank deposits.

C) equal to the nominal interest rate minus the inflation rate.

D) the interest rate that commercial banks pay for reserves that they borrow from the Fed.

E) the interest rate that commercial banks receive for the reserves that they have on reserve at the Fed.

Answer:  D

Topic:  Fed policy tools, discount rate

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.3

Status:  DMC

 

39) If the Fed increases the discount rate,

A) commercial banks pay a higher interest rate if they borrow from the Fed.

B) commercial banks pay a lower interest rate if they borrow from the Fed.

C) commercial banks’ assets increase.

D) commercial banks find it more profitable to increase their loans to businesses.

E) commercial banks increase their lending to the Fed.

Answer:  A

Topic:  Fed policy tools, discount rate

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.3

Status:  TPS

40) Open market operations are the

A) purchase or sale of government securities by the Fed.

B) lending of reserves to the banking system by the Fed.

C) borrowing of reserves by the Fed from the banking system.

D) minimum percentage of loans that banks must retain as reserves in the open market.

E) purchase or sale of gold by the Fed.

Answer:  A

Topic:  Fed policy tools, open market operations

Skill:  Level 1: Definition

Section:  Checkpoint 11.3

Status:  WM