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When the legal reserve requirement is lowered the money multiplier increases and the amount of excess reserves increases in the banking system

When the legal reserve requirement is lowered,

a.the money multiplier increases, and the amount of excess reserves increases in the
banking system

b.the money multiplier decreases, and the amount of excess reserves increases in the
banking system

c.the money multiplier decreases, and the amount of excess reserves decreases in the
banking system

d.the money multiplier increases, and the amount of excess reserves decreases in the
banking system

e.there is no change in either the money multiplier or the amount of excess reserves in
the banking system

22.              When the legal reserve requirement is changed,

a.the money multiplier is changed but the amount of excess reserves in the banking
system is unchanged

b.the money multiplier is unchanged but the amount of excess reserves in the banking
system is changed

c.the size of the money multiplier and the amount of excess reserves change in the
opposite direction from the legal reserve requirement

d.the size of the money multiplier and the amount of excess reserves change in the
same direction as the legal reserve requirement

e.neither the money multiplier nor the amount of excess reserves change.

23.              The federal government agency that insures demand deposits for up to $250,000 is the

a.Federal Reserve System

b.Federal Deposit Insurance Corporation

c.Federal Savings and Loan Insurance Corporation

d.Resolution Trust Corporation

e.Bank Insurance Trust Corporation

24.              When the federal government deregulated the banking industry, savings and loans

a.continued to make only mortgage loans

b.began to make riskier loans in areas such as speculative land development

c.developed new loan markets which allowed them to prosper and expand

d.began to merge with commercial banks

e.lowered interest rates to attract new depositors

25.              Which of the following is a bank liability?

a.required reserves

b.excess reserves

c.actual reserves

d.demand deposits

e.loans

26.              Suppose a bank has demand deposits of $100,000 and the legal reserve requirement is 20
                            percent. If the bank currently has $100,000 in reserves, it could expand the money supply
                            by as much as

a.$100,000

b.$400,000

c.$0

d.$20,000

e.$80,000

27.              If a bank has $100,000 in demand deposits, reserves of $20,000, and no excess reserves,
                            then the legal reserve requirement is

a.10 percent

b.20 percent

c.25 percent

d.30 percent

e.50 percent

28.              Because the banking system operates using fractional reserves,

a.the money multiplier is greater than one

b.excess reserves are equal to zero

c.required reserves are equal to 100 percent

d.banks can loan out only their required reserves

e.the money multiplier must be equal to zero

29.              The money supply will grow faster through deposit creation when the legal reserve
                            requirement is

a.high and banks hold excess reserves

b.high and banks cannot find good customers to lend to

c.low and banks are able to lend out all of their excess reserves

d.low and banks are unable to loan out all of their excess reserves

e.high and banks are not able to loan out all of their excess reserves

30.              A bank creates money when it

a.gets new demand deposits that the depositor formerly held as cash

b.has a loan paid off, which creates excess reserves for the bank

c.makes a loan from its excess reserves

d.holds back excess reserves because of an increase in the legal reserve requirement

e.gets more excess reserves because of a decrease in the legal reserve requirement

Feb 11 2020 View more View Less

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