Question

A commercial bank can increase its (total) loans by an amount equal to its

Group of answer choices

holdings of government securities. (ie .e., the value of)

required reserves

excess reserves

checkable deposits

18

If the reserve ratio is 20%, the value of the money multiplier would be

Group of answer choices

10

5

20

0.5

19

Assuming that the banking system is “all loaned up”. Based on your above answer, given an increase in checkable deposits of $10 billion, how much money could the banking system potentially create?

Group of answer choices

$0—only the Fed can create money (by “printing it”)

$20 billion

12.5 billion

$50 billion

$40 billion

20

What assumption(s) must be made when you derived your answer for question 19?

Group of answer choices

banks must be willing to loan out all their excess reserves

interest rates must be at fairly low levels

the economy must be at or near full employment

the demand for money must be constant

none are correct — only the Fed can create money

21

As part of the Federal Reserve System, how many “regional” federal reserve banks are there?

Group of answer choices

1

12

50

24

22

To say that Federal Reserve Banks are "quasi-public" institutions means that

Group of answer choices

they are privately owned, but publicly controlled

they deal only with commercial banks, not the public

they deal only with the public, not commercial banks

they are publicly owned, but privately managed

Answer 1

Answer- A commercial bank can increase its (total) loans by an amount equal to its

- excess reserve

Answer 18. If the reserve ratio is 20%, the value of the money multiplier would be - 5

Explanation- money multiplier = 1/required reserve

=1/20% = 5

Answer 19- Assuming that the banking system is “all loaned up”. Based on your above answer, given an increase in checkable deposits of $10 billion, how much money could the banking system potentially create? - $40 billion

Explanation- required reserve = $10 × 20% = $2 billion

Excess reserve = $10 - $2 = $8 billion

Money supply = excess reserve × money multiplier

= $8 billion × 5 =$40 billion

Answer 20- What assumption(s) must be made when you derived your answer for question 19?

-Banks must be willing to loan out all their excess reserves

Answer 21- As part of the Federal Reserve System, how many “regional” federal reserve banks are there?

- 12.

Answer 22- To say that Federal Reserve Banks are "quasi-public" institutions means that-

They are privately owned, but publicly controlled

-