Chapter 15 Questions

A banking system in which only a portion of checkable deposits are backed up by cash in bank vaults or deposits in the central bank is called a

What are true statements about the history of the fractional banking system?

Banks operating on the basis of ______ reserves are vulnerable to "panics" or "runs."

A balance sheet of a commercial bank is a statement of assets and ______ on assets, which summarize the financial position of the bank at a certain time.

If the founders of a bank have sold $100,000 worth of shares of stock, some to themselves and some to other people, the balance sheet will read

A banking system in which only a portion of checkable deposits are backed up by cash in bank vaults or deposits in the central bank is called a(n) ______ ______ banking system.

If a bank uses $100,000 to purchase a building for $80,000 and equipment for $10,000, the balance sheet at the end of the transactions will be ______.

Which statement best illustrates the history of the fractional banking system?

The two basic functions of commercial banks are to accept ______ and make ______.

What are the two significant characteristics of fractional reserve banking?

What is the statement of the assets, liabilities, and net worth of a firm or individual at some given time called?

The fraction of deposits that a bank is required by law to hold and not lend out is called its _____.

A bank that has just opened should have assets ______ its liabilities and net worth.

True or false: Banks keep a portion of their reserves in their own vaults.

After a new company purchases a building and pays for office supplies, its balance sheet will ______.

What term refers to the amount of reserves that a commercial bank must keep that is a percentage of the bank's checkable deposit liabilities?

Which of the following are the two basic functions of commercial banks?

A bank's excess reserves equals the bank's ______ reserves minus its required reserves.

When a deposited check is drawn against another bank, the collection of that check will (increase/decrease) the reserves and the checkable deposits of the bank from which it was drawn.

By law, all commercial banks and thrift institutions that provide checkable deposits are required to _____.

Which entity creates money by making loans and purchasing government bonds?

Where are places that a bank can keep its reserves?

A single commercial bank can lend only an amount equal to its (excess/required) reserves.

Dividing a commercial bank's required reserves by its checkable deposit liabilities produces the

What are true statements about a commercial bank's buying government securities from the public?

Which of the following is the correct formula for calculating excess reserves?

Before 2008, what was the incentive for banks with excess reserves to lend money overnight to banks short of required reserves?

Abe receives a check from Bea for fixing Bea's car. Bea's bank is Bank B. Abe deposits the check into his bank, Bank A. Select all the statements that correct describe the check-clearing process.

What are the two methods by which commercial banks create money?

True or false: Commercial banks can create money by a multiple of its excess reserves.

The maximum amount of money that a single commercial bank can lend is equal to its ______.

An individual bank can safely lend an amount equal to its excess reserves, but a commercial banking system can lend _____.

When a bank buys government securities, they will appear on its balance sheet as a(n) _____ called "Securities."

What is the money multiplier?

Banks that borrow in the federal funds market do so because they are temporarily short of _____ reserves.

When a deposited check is drawn against another bank, the collection of that check will ______ the reserves and the checkable deposits of the bank from which it was drawn.

The commercial banking system is capable of increasing money by an amount ______ its excess reserves.

When customers pay off loans they owe to banks, what is the effect on checkable deposit money?

What are true statements about commercial banks and individual banks?

The money multiplier is the reciprocal of required ______ ratio.

______ deposit money is destroyed when loans are paid off.

What is one significant characteristic of fractional reserve banking?

What is one significant consequence of fractional reserve banking?

A fractional reserve banking system

Most modern banking systems are based on

A commercial bank's reserves are

A bank that has liabilities of $120 billion and a net worth of $20 billion must have

A bank's checkable deposits shrink from $40 million to $33 million. What happens to its required reserves if the required reserve ratio is 3 percent?

If you deposit a $50 bill in a commercial bank that has a 10 percent legal reserve requirement, the bank will

Which of the following is correct?

A banker must strike a balance in the pursuit of two conflicting goals: profits and liquidity. In terms of asset management, this translates into achieving a balance between holding

When banks borrow and lend reserves in the federal funds market,

A commercial bank buys a $100,000 government security from a securities dealer. The bank pays the dealer by increasing the dealer's checkable deposit balance by $100,000. The money supply has

The commercial banking system can lend by a multiple of its excess reserves primarily because

(Last Word) The term "leverage" refers to

Consider the following information about a banking system: new currency deposited in the system = $40 billion, legal reserve ratio = 0.20, excess reserves prior to the currency deposit = $0. The $40 billion deposit of currency into checking accounts will create excess reserves of

If Bank A has excess reserves of $1 million and all other banks in the system do not have any excess reserves, then the amount of additional loans that can be made by the banking system will be

The multiple by which the commercial banking system can expand the supply of money is equal to the reciprocal of

One way to enhance the stability of the banking system is to

When bankers hold excess reserves,

Refer to the accompanying balance sheet for the First National Bank. Assume the reserve ratio is 15 percent. First National Bank can make new loans of up to