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A goldsmith has $2 million of gold in his vaults. He issues $5 million in gold receipts. H

A goldsmith has $2 million of gold in his vaults. He issues $5 million in gold receipts. H

A goldsmith has $2 million of gold in his vaults. He issues $5 million in gold receipts. His gold holdings are what fraction of the paper money (gold receipts) he has issued?

a. 1/10.

b. 1/5.

c. 2/5.

d. 5/5.

2. A commercial bank has $100 million in checkable-deposit liabilities and $12 million in actual reserves. The required reserve ratio is 10 percent. How big are the bank’s excess reserves?

a. $100 million.

b. $88 million.

c. $12 million.

d. $2 million.

3. The actual reason that banks must hold required reserves is:

a. To enhance liquidity and deter bank runs.

b. To help fund the Federal Deposit Insurance Corporation, which insures bank deposits.

c. To give the Fed control over the lending ability of commercial banks.

d. To help increase the number of bank loans.

Abhinav 05-Dec-2019

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