Question 1

If m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio, then for the banking system,

Accepted Answer

A)   m = R ? 1.
B)    R=m/1R = m / 1R=m/1 
C)   R = m ? 1.
D)    m=1/Rm = 1 / Rm=1/RE) All of the above
F) B) and C)

Question 2

Which of the following describes the identity embodied in a balance sheet?

Accepted Answer

A)   Net worth plus assets equal liabilities.
B)   Assets plus liabilities equal net worth.
C)   Assets equal liabilities plus net worth.
D)   Assets plus reserves equal net worth.E) None of the above
F) A) and D)

Question 3

A commercial bank has excess reserves of $10,000 and a required reserve ratio of 20 percent. It grants a loan of $8,000 to a customer, who then writes out a check for $8,000 that is deposited in another bank. The ﬁrst bank will
ﬁnd its reserves decrease by

Accepted Answer

A)   $2,000.
B)   $3,000.
C)   $1,600.
D)   $8,000.E) B) and C)
F) A) and D)

Question 4

Refer to the accompanying consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All ﬁgures are in billions. The maximum amount by which the commercial banking
System can expand the supply of money by lending is

Accepted Answer

A)   $30 billion.
B)   $23.1 billion.
C)   $27 billion.
D)   $15 billion.E) None of the above
F) B) and C)

Question 5

Commercial banks increase the supply of money when they purchase either personal IOUs or government bonds
from businesses and households.

Accepted Answer

A) True 
 B)False

Exam 15: Money Creation

Which of the following describes the identity embodied in a balance sheet?

Correct Answer
verified

Commercial banks increase the supply of money when they purchase either personal IOUs or government bonds from businesses and households.

Correct Answer
verified

Refer to the accompanying consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All ﬁgures are in billions. The maximum amount by which the commercial banking System can expand the supply of money by lending is

Correct Answer
verified

A commercial bank has excess reserves of $10,000 and a required reserve ratio of 20 percent. It grants a loan of $8,000 to a customer, who then writes out a check for $8,000 that is deposited in another bank. The ﬁrst bank will ﬁnd its reserves decrease by

Correct Answer
verified

If m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio, then for the banking system,

Correct Answer
verified

Exam 15: Money Creation

Which of the following describes the identity embodied in a balance sheet?

Correct AnswerverifiedShow Answer

Commercial banks increase the supply of money when they purchase either personal IOUs or government bonds from businesses and households.

Correct AnswerverifiedShow Answer

Refer to the accompanying consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All ﬁgures are in billions. The maximum amount by which the commercial banking System can expand the supply of money by lending is

Correct AnswerverifiedShow Answer

A commercial bank has excess reserves of $10,000 and a required reserve ratio of 20 percent. It grants a loan of $8,000 to a customer, who then writes out a check for $8,000 that is deposited in another bank. The ﬁrst bank will ﬁnd its reserves decrease by

Correct AnswerverifiedShow Answer

If m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio, then for the banking system,

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified