Banking System Questions In Tutorial Library

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TITLE: Banking System Questions

CLASS / COURSE: Economics


1. Fractional reserve banking is a term used to describe a banking system whereby
a. individual banks share a fraction of the total funds deposited in the whole banking system.
b. banks are required to quote interest rates in fractions.
c. banks hold reserves equal to only a fraction of their deposit liabilities.
d. banks hold reserves equal to a multiple of their deposit liabilities; that is, fractional in this case really means multiple.
e. banks are required to maintain a certain fraction of their deposits in the form of checkable deposits, a certain fraction of their deposits in the form of savings deposits, etc.
2. Reserves held beyond the required amount are called -------------- reserves.
a. Redundant
b. Precautionary
c. Excess
d. Surplus
3. A bank has $10,000 in excess reserves and the required reserve ratio is 20 percent. this means the bank could have __________ in checkable deposit liabilities and _______ in reserves
a. $80,000, $10,000
b. $100,000 , $20,000
c. $50,000 ,  $25,000
d. $100,000,  $30,000
4. Bank A has checkable deposits of $10 million and reserves of $1 million. The required reserve ratio is 9 percent. The bank has excess reserve of
a. $910,000
b. $91,000
c. $100,000
d. $10,000
e. There is not enough information provided to answer the question
5. A house is worth $100,000 , a computer is worth $2,000, and a car is worth $ 20,000. In this context, money is principally functioning as a 
6. If M1 is $1,200 billion , currency held outside banks is $400 billion, and traveller’s checks is $10 billion, then small denomination time deposits equal
7. Suppose the Fed forecasts a reduction in cash leakages. It might offset the effect of this on the money supply by
8. Which of the following actions is most likely to lead to an increase in money supply?
9. The fed has been called “the lender of last resort” because it 
10. In controlling the nation’s money supply, the Fed is obligated to seek the advice of
11. Which of the following will increase the money supply?

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