Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: O the money supply by the whole banking system can increase by $1,000. O the money supply by the whole banking system can increase by $4,000. O the money supply by the whole banking system can increase by $8,000. O the money supply by the whole banking system can increase by $5,000.

Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: O the money supply by the whole banking system can increase by $1,000. O the money supply by the whole banking system can increase by $4,000. O the money supply by the whole banking system can increase by $8,000. O the money supply by the whole banking system can increase by $5,000.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 3.5P

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If the reserve ratio is 10% and excess reserves increase by $1,000, what is the maximum possible increase in checkable deposits throughout the banking system? * O so O $100 O $1,000 $10,000 $100,000
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Why would a bank prefer making loans by borrowing funds in the fed funds market? Select one: O A. The fed funds rate is less than the interest rate on reserve balances OB. The fed funds market is less regulated than bank reserves O C. Banks need to maintain reserves above the Fed's required reserve ratio O D. Each of these answers is correct Which of the following is (1) calculated with information provided by the Bureau of Economic Analysis, (2) tracks domestic spending on durable goods, non-durable goods, and services, and (3) factors in recent price changes before comparing to an index base? O a. The Consumer Price Index (CPI) O b. The Producer Price Index (PPI) O c. The Personal Consumption Expenditures Price Index (PCEPI) O d. The International Standards Price Index (ISPI)
If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 25 percent, what happens to the money supply in the very short term? O a. It decreases by $100. O b. It increases by $25. O C. It decreases by $25. O d. It increases by $100. Show Transcribed Text Suppose a bank has $200,000 in deposits and $150,000 in loans. What is its reserve ratio? O a. 1 percent O b. 5 percent O C. 10 percent O d. 25 percent Show Transcribed Text Which list ranks the Bank of Canada's monetary policy tools from most to least frequently used? O a. bank rate changes; open-market transactions; reserve requirement changes O b. bank rate changes; reserve requirement changes; open-market transactions O c. open-market transactions; bank rate changes; reserve requirement changes O d. open-market transactions; reserve requirement changes; bank rate changes
If Bank A's total reserves are $10.8 million, its excess reserves are $4.60 million, and the required reserve ratio is 4%, then Bank A's required reserves equal and its total deposits equal $6.2 million; $105 million $6.6 million; $165 million O $6.6 million; $270 million O $6.1 million; $122 million $6.2 million; $155 million
Banks create money by O a. buying U.S. government securities with cash. O b. printing money up to their required reserve limit. O c. creating deposits without limit. O d. making loans and creating deposits, a process that is limited by the size of banks' excess reserves. O e. printing dollar bills without limit.
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