Question : 41) If a bank has excess reserves of $7,000 and : 1373772

41) If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000, and if the reserve requirement is 10 percent, then the bank has actual reserves of

A) $14,000.

B) $17,000.

C) $22,000.

D) $27,000.

42) A bank has excess reserves of $6,000 and demand deposit liabilities of $100,000 when the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, the bank’s excess reserves will be

A) -$5,000.

B) -$1,000.

C) $1,000.

D) $5,000.

43) A bank has excess reserves of $4,000 and demand deposit liabilities of $100,000 when the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, the bank’s excess reserves will be

A) -$5,000.

B) -$1,000.

C) $1,000.

D) $5,000.

44) A bank has excess reserves of $10,000 and demand deposit liabilities of $100,000 when the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, the bank’s excess reserves will be

A) -$5,000.

B) -$1,000.

C) $1,000.

D) $5,000.

45) A bank has no excess reserves and demand deposit liabilities of $100,000 when the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, the bank’s excess reserves will now be

A) -$5,000.

B) -$1,000.

C) $1,000.

D) $5,000.

46) A bank has excess reserves of $1,000 and demand deposit liabilities of $80,000 when the reserve requirement is 20 percent. If the reserve requirement is lowered to 10 percent, the bank’s excess reserves will be

A) $1,000.

B) $8,000.

C) $9,000.

D) $17,000.

47) A bank has excess reserves of $1,000 and demand deposit liabilities of $80,000 when the reserve requirement is 25 percent. If the reserve requirement is lowered to 20 percent, the bank’s excess reserves will be

A) $1,000.

B) $5,000.

C) $8,000.

D) $9,000.

48) Decisions by depositors to increase their holdings of ________, or of banks to hold ________ will result in a smaller expansion of deposits than the simple model predicts.

A) deposits; required reserves

B) deposits; excess reserves

C) currency; required reserves

D) currency; excess reserves

49) Decisions by depositors to increase their holdings of ________, or of banks to hold excess reserves will result in a ________ expansion of deposits than the simple model predicts.

A) deposits; smaller

B) deposits; larger

C) currency; smaller

D) currency; larger

50) Decisions by ________ about their holdings of currency and by ________ about their holdings of excess reserves affect the money supply.

A) borrowers; depositors

B) banks; depositors

C) depositors; borrowers

D) depositors; banks

51) Assume that no banks hold excess reserves, and the public holds no currency. If a bank sells a $100 security to the Fed, explain what happens to this bank and two additional steps in the deposit expansion process, assuming a 10% reserve requirement. How much do deposits and loans increase for the banking system when the process is completed?

52) Explain two reasons why the Fed does not have complete control over the level of bank deposits and loans. Explain how a change in either factor affects the deposit expansion process.

53) Explain why the simple deposit multiplier overstates the true deposit multiplier.