(Table: Bank Balance Sheet) Based on the table, what is the leverage ratio at the bank?
  • leverage.
  • 20
  • 10 percent
  • 5
The most frequently used tool of monetary policy is:
  • open-market operations.
  • sells government bonds.
  • riskiness of the bank's assets.
  • the money multiplier.
(Table: Bank Balance Sheet) Based on the table, owners' equity will fall to zero if loan defaults reduce the value of total assets by percent.
  • 10 percent
  • 20
  • the money supply decreases.
  • $800 billion.
To increase the money multiplier, the Fed can:
  • conduct open-market purchases.
  • above the legally required amount.
  • lower the interest rate paid on reserves.
  • buys government bonds.
Open market operations are:
  • currency held by the public, plus reserves held by banks.
  • Federal Reserve purchases and sales of government bonds.
  • decreases the reserve-deposit ratio (rr).
  • preferences of households about the form of money they wish to hold.
(Table: Bank Balance Sheet) Based on the table, what is the reserve/deposit ratio at the bank?
  • $150 billion.
  • capital
  • 10 percent
  • public.
High powered money is another name for:
  • currency-deposit ratio.
  • checking accounts.
  • monetary base increases.
  • the monetary base.
What is the value of bank capital?
  • the monetary base.
  • -$1,000
  • public.
  • capital
An important factor in the evolution of commodity money to fiat money is:
  • a double coincidence of wants
  • decrease the discount rate.
  • a desire to reduce transaction costs.
  • riskiness of the bank's assets.
When the Federal Reserve conducts an open market purchase, it buys bonds from the:
  • public.
  • $800 billion.
  • leverage.
  • capital
The money supply will increase if the:
  • monetary base increases.
  • the money multiplier.
  • open-market operations.
  • currency-deposit ratio increases.
The amount of capital that banks are required to hold depends on the:
  • is likely to decrease the monetary base
  • riskiness of the bank's assets.
  • a desire to reduce transaction costs.
  • the money multiplier.
If the reserve-deposit ratio is less than one, and the monetary base increases by $1 million, then the money supply will:
  • increase by more than $1 million.
  • decreases the reserve-deposit ratio (rr).
  • decrease the discount rate.
  • increases the reserve-deposit ratio (rr).
If the Federal Reserve wishes to increase the money supply, it should:
  • decreases the reserve-deposit ratio (rr).
  • increase by more than $1 million.
  • decrease the discount rate.
  • riskiness of the bank's assets.
To increase the monetary base, the Fed can:
  • monetary base increases.
  • cannot affect the money supply.
  • conduct open-market purchases.
  • lower the interest rate paid on reserves.
The reserve deposit ratio is determined by:
  • preferences of households about the form of money they wish to hold.
  • is likely to decrease the monetary base
  • business policies of banks and the laws regulating banks.
  • currency held by the public, plus reserves held by banks.
If you hear in the news that the Federal Reserve conducted open market purchases, then you should expect ? to increase.
  • remains the same.
  • the monetary base.
  • the money supply
  • the money supply decreases.
In a 100 percent reserve banking system, if a customer deposits $100 of currency into a bank, then the money supply:
  • decrease the discount rate.
  • the money supply
  • remains the same.
  • more; decrease
If the currency-deposit ratio equals 0.5 and the reserve-deposit ratio equals 0.1, then the money multiplier equals:
  • 2.5.
  • $600 billion.
  • public.
  • increase by more than $1 million.
The interest rate charged on loans by the Federal Reserve to banks is called the:
  • the Federal Reserve.
  • decrease the discount rate.
  • Treasury bill rate.
  • the money multiplier.
The currency deposit ratio is determined by
  • preferences of households about the form of money they wish to hold.
  • lower the interest rate paid on reserves.
  • decreases the reserve-deposit ratio (rr).
  • currency-deposit ratio.
When the Fed decreases the interest rate paid on reserves, if the ratio of currency to deposits decreases also while the monetary base is constant, then:
  • the money supply
  • is likely to decrease the monetary base
  • the money supply increases.
  • the money supply decreases.
Currency equals:
  • decrease the discount rate.
  • the Federal Reserve.
  • currency-deposit ratio increases.
  • the sum of coins and paper money.
In a fractional reserve banking system, banks create money because:
  • increases the reserve-deposit ratio (rr).
  • each dollar of reserves generates many dollars of demand deposits.
  • preferences of households about the form of money they wish to hold.
  • a desire to reduce transaction costs.
To reduce the money supply, the Federal Reserve:
  • conduct open-market purchases.
  • lower the interest rate paid on reserves.
  • currency-deposit ratio.
  • sells government bonds.
To prevent banks from using excess reserves to make loans that would increase the money supply, the Federal Reserve could conduct open market ? and ? the interest rate paid on bank reserves.
  • leverage.
  • sales; raise
  • more; decrease
  • $600 billion.
In a system with 100 percent reserve banking:
  • make loans.
  • all banks hold reserves equal to a fraction of their deposits.
  • conduct open-market purchases.
  • no banks can make loans.
To increase the money supply, the Federal Reserve:
  • buys government bonds.
  • currency-deposit ratio.
  • conduct open-market purchases.
  • sells government bonds.
If the ratio of reserves to deposits (rr) increases, while the ratio of currency to deposits (cr) is constant and the monetary base (B) is constant, then:
  • the money multiplier.
  • the money supply increases.
  • the money supply decreases.
  • the money supply
The use of borrowed funds to supplement existing funds for purposes of investment is called:
  • 10 percent
  • capital
  • the Federal Reserve.
  • leverage.
When the Fed increases the interest rate paid on reserves, it:
  • increases the reserve-deposit ratio (rr).
  • increase by more than $1 million.
  • decreases the reserve-deposit ratio (rr).
  • is likely to decrease the monetary base
If the Federal Reserve increases the interest rate paid on reserves, banks will tend to hold ? excess reserves, which will ? the money multiplier.
  • decrease the discount rate.
  • the money supply
  • more; decrease
  • sales; raise
The minimum amount of owners' equity in a bank mandated by regulators is called a ? requirement.
  • 10 percent
  • capital
  • fiat
  • $800 billion.
To make a trade in a barter economy requires
  • lower the interest rate paid on reserves.
  • sells government bonds.
  • cannot affect the money supply.
  • a double coincidence of wants
In a fractional reserve banking system, banks create money when they:
  • no banks can make loans.
  • amount of gold.
  • each dollar of reserves generates many dollars of demand deposits.
  • make loans.
In a country on a gold standard, the quantity of money is determined by the:
  • commodity money.
  • amount of gold.
  • riskiness of the bank's assets.
  • the money supply
In a system with fractional reserve banking
  • each dollar of reserves generates many dollars of demand deposits.
  • all banks hold reserves equal to a fraction of their deposits.
  • preferences of households about the form of money they wish to hold.
  • make loans.
When the Fed makes an open
  • decreases the reserve-deposit ratio (rr).
  • increases the reserve-deposit ratio (rr).
  • market sale, it:- decreases the monetary base
  • Federal Reserve purchases and sales of government bonds.
If currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the monetary base equals:
  • amount of gold.
  • sales; raise
  • $800 billion.
  • $150 billion.
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