Question 1

Required reserves

Accepted Answer

all of the above

Question 2

Excess reserves

Accepted Answer

= actual reserves - required reserves

Question 3

Actual reserves

Accepted Answer

are all the funds that a bank has on deposit at the Federal Reserve and as vault cash

Question 4

Banks can safely make loans equal to the amount of

Accepted Answer

excess reserves

Question 5

Reserves and checkable deposits at an individual bank both decrease when

Accepted Answer

checks written by bank customers are cleared

Question 6

Money is created when

Accepted Answer

banks buy bonds from the public and make loans

Question 7

Money is destroyed when

Accepted Answer

both 1 and 2

Question 8

Which of the following statements is NOT correct?

Accepted Answer

banks primarily make profits by selling stock and insurance

Question 9

The entire banking system can lend (and therefore increase the money supply) by an amount equal to

Accepted Answer

excess reserves * the monetary multiplier

Question 10

The monetary multiplier

Accepted Answer

=1/reserve ratio

Question 11

Other things being equal, an expansion of commercial bank lending:

Accepted Answer

increases the money supply.

Question 12

Other things being equal, an contraction of commercial bank lending:

Accepted Answer

decreases the money supply.

ch. 15 example #74143

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