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If a bank does not loan out all of its excess reserves the amount of money the banking system can create is greater than if all of the excess

  If a bank does not loan out all of its excess reserves, the amount of money the banking
                            system can create is greater than if all of the excess reserves were loaned out.

22.              Actual reserves are equal to required reserves plus excess reserves.

 

23.              If the legal reserve requirement is decreased, the money multiplier is decreased.

 

24.              Federal deposit insurance may encourage banks to take on riskier loans that could lead to
                            a greater incidence of bank failures.

25.              The large number of bank failures in Texas and Oklahoma was related to a decline in the
                            price of oil.

26.              Before the banking industry was deregulated, the interest rates that savings and loan
                            institutions paid to depositors was fixed by the federal government.

27.              During economic expansions, banks tend to lend less money because of higher interest
                            rates.

28.              Because a sufficient number of borrowers cannot be guaranteed, we refer to a potential
                            money multiplier when discussing the banking system.

29.              Excess reserves are borrowed funds loaned in excess of legal reserve requirements.

 

30.              If the fractional reserve system were to cease to exist, the banking system would be able
                            to create money.

31.              If Macroland’s first Prime Bank has deposits of $35,000 and makes the maximum possible loans
                            of $50,000 allowed, then Macroland’s legal reserve requirement must be 17.5 percent.

32.              When Macroland’s central banking authority reduces the legal reserve requirement by
                            one half, the potential demand deposits will double.

33.              The Federal Deposit Insurance Corporation was created to ensure that savings and loan
                            associations would be guaranteed as safe as banks.

34.              One outcome of the creation of the Federal Deposit Insurance Corporation was the
                            reduction of moral hazard problems.

Feb 11 2020 View more View Less

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