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Exam 34: Money Creation

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Question 21

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The claims of the owners of a firm against the firm's assets are called:

A) working capital.
B) assets.
C) net worth.
D) liabilities.

E) A) and C)
F) B) and D)

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Question 22

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Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r } \text { Reserves } & \$ 100 \\\text { Checkable Deposits } & 1,000 \\\text { Loans (to customers) } & 300 \\\text { Property } & 400 \\\text { Securities (owned) } & 300 \\\text { Stock Shares } & 100\end{array}$ Assume that the listed amounts constitute this bank's complete set of accounts.Moolah's:

A) assets are $1,000.
B) liabilities are $1,000.
C) net worth is zero.
D) profit is $1,000.

E) All of the above
F) None of the above

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Question 23

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When a bank loan is repaid,the supply of money:

The federal funds market is the market in which:

A bank that has assets of $85 billion and a net worth of $10 billion must have:

Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r } \text { Reserves } & \$ 100 \\\text { Checkable Deposits } & 1,000 \\\text { Loans (to customers) } & 300 \\\text { Property } & 400 \\\text { Securities (owned) } & 300 \\\text { Stock Shares } & 100\end{array}$ Refer to the information and assume that Moolah Bank is "loaned up." If it receives a $100 deposit of currency,the banking system of which Moolah is a part could expand loans by:

Suppose that a bank's actual reserves are $5 million,its checkable deposits are $5 million,and its excess reserves are $3 million.The reserve requirement must be:

Loans made to customers are a liability on a bank's balance sheet.

Assume the Standard Internet Company negotiates a loan for $5,000 from the Metro National Bank and receives a checkable deposit for that amount in exchange for its promissory note (IOU) .As a result of this transaction:

Answer the question on the basis of the following consolidated balance sheet for the commercial banking system.Assume the required reserve ratio is 30 percent.All figures are in billions. $\begin{array}{c}\begin{array}{lll}\quad\quad\quad\underline{\text { Assets}}\\\text { Reserves}\\\text { Securities}\\\text { Loans}\\\text { Property} \end{array}\begin{array}{l}\\\$ 51 \\109 \\100\\10\end{array}\begin{array}{lll}\quad\quad \underline{\text { Liabilities \& Net Worth }}\\\text { Checkable Deposits}\\\text { Stock Shares}\\\\\\\end{array}\begin{array}{lll}\\\$140\\130\\\\\\\end{array}\end{array}$ Refer to the data.The maximum amount by which the commercial banking system can expand the supply of money by lending is:

Suppose a credit union has checkable deposits of $500,000 and the legal reserve ratio is 10 percent.If the institution has excess reserves of $4,000,then its actual reserves are:

A bank that has liabilities of $150 billion and a net worth of $20 billion must have:

When a commercial bank has excess reserves:

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to row 2 in the table.The number appropriate for space X is:

The greater the leverage in the financial system,all else equal:

The banking system can lend by a multiple of its excess reserves because lending does not result in a loss of reserves to the banking system as a whole.

The monetary multiplier and the spending multiplier are two ways of referring to the same concept.

The primary purpose of the legal reserve requirement is to:

The supply of money increases when the public buys government securities from commercial banks.

Answer the question on the basis of the following table for a commercial bank or thrift: Refer to row 4 in the table.The number appropriate for space Z is: