Question 1

If Bank of Mateer has a required reserve ratio of 40 percent and there is $100,000 in deposits,what is the amount of required reserves?

Accepted Answer

The required reserve ratio is 40 percent, so the amount of required reserves is 0.40 x $100,000 = $40,000.

Question 2

A bank can make loans when

Accepted Answer

A bank can make loans when it has excess reserves greater than zero, as these are funds available beyond the required reserves that can be used for lending.

Question 3

If a bank has a required reserve ratio of 10 percent and has required reserves of $100,000,000,how much does the bank hold in deposits?

Accepted Answer

The required reserve ratio is 10%, meaning the bank must hold 10% of its deposits as reserves. If the required reserves are $100,000,000, then the total deposits are $100,000,000 / 0.10 = $1,000,000,000.

Question 4

Suppose that the Bank of Oranges has excess reserves of $80,000,000 and checkable deposits of $500,000,000.If the bank has a reserve requirement of 10 percent,what is the bank's total amount of reserves?

Accepted Answer

The bank's total reserves are the sum of required reserves and excess reserves. Required reserves are 10% of checkable deposits, which is $50,000,000. Adding the excess reserves of $80,000,000 gives a total of $130,000,000.

Question 5

If a bank has required reserves of $45,000,000,excess reserves of $12,000,000,and deposits of $90,000,000 with a required reserve ratio of 50 percent,how much can the bank lend out?

Accepted Answer

The answer of If a bank has required reserves of...

Question 6

If Bank of Mateer has a required reserve ratio of 40 percent and there is $100,000 in deposits,what is the maximum amount of money it can loan?

Accepted Answer

The required reserve ratio is 40%, meaning the bank must keep 40% of $100,000 in reserves, which is $40,000. The remaining $60,000 can be loaned out.

Question 7

A bank's balance sheet will indicate that institution's ability to manage which of the following two conflicting objectives?

Accepted Answer

A bank's balance sheet displays its assets, liabilities, and equity. It shows how much money a bank has, how much it owes to customers and other institutions, and how much of its money is invested in assets. Profitability is essential to keep a bank running, but a bank must also maintain sufficient liquidity to meet its obligations to depositors and satisfy withdrawal requests. Thus, the balance sheet reflects a bank's ability to manage the conflicting objectives of profitability and liquidity.

Question 8

When can a bank make loans?

Accepted Answer

A bank can make loans when it has reserves greater than the amount of required reserves. Required reserves are determined by the amount of deposits a bank has, and banks are required to hold a certain percentage as reserves. If a bank has reserves beyond this required amount, it can use those funds to make loans.

Question 9

If a bank has a required reserve ratio of 25 percent and there is $10,000 in deposits,what is the maximum amount of loans that can be made by this bank?

Accepted Answer

The bank must keep 25% of $10,000 as reserves, which is $2,500. The remaining $7,500 can be loaned out.

Question 10

If a bank that faces a 10 percent reserve ratio received a deposit of $50,000 and makes a loan to a customer for $5,000,what is the consequence if the bank then deposits the rest of the funds at the Federal Reserve?

Accepted Answer

The bank must keep 10% of $50,000 as required reserves, which is $5,000. After making a $5,000 loan, the remaining $45,000 is deposited at the Federal Reserve, increasing excess reserves by $40,000.

Question 11

Mena receives a $1,000 check from her parents for her birthday,and she deposits this in a bank that faces a 10 percent reserve ratio.What is the consequence if the bank then deposits her check at the Federal Reserve?

Accepted Answer

The bank is required to keep 10% of the deposit as reserves, which is $100 in this case (10% of $1,000). Therefore, the required reserves increase by $100. The remaining $900 is the bank's excess reserves, which increase by $900. The deposit of Mena's check at the Federal Reserve does not affect the reserves.

Question 12

Sayed receives a bonus check from his employer for $10,000,and he deposits this in a bank that faces a 20 percent reserve ratio.What is the consequence if the bank then deposits his check at the Federal Reserve?

Accepted Answer

When the bank deposits the $10,000 check at the Federal Reserve, $2,000 is held as required reserves (20% of $10,000), and the remaining $8,000 becomes excess reserves.

Question 13

If a bank has a required reserve ratio of 25 percent and there is $10,000 in deposits,what is the amount of required reserves?

Accepted Answer

The amount of required reserves can be calculated by multiplying the deposits by the required reserve ratio: $10,000 x 0.25 = $2,500.

Question 14

If a bank has a required reserve ratio of 10 percent,excess reserves of $10,000,000,and deposits of $500,000,000,how much can the bank lend out?

Accepted Answer

The answer of If a bank has a required reserve...

Question 15

If a bank has a required reserve ratio of 30 percent,excess reserves of $45,000,000,and deposits of $100,000,000,how much can the bank lend out?

Accepted Answer

The bank can lend out its excess reserves, which are $45,000,000. The required reserve ratio does not affect the amount of excess reserves available for lending.

Question 16

If a bank has required reserves of $27,000,000,excess reserves of $41,000,000,and deposits of $90,000,000 with a required reserve ratio of 30 percent,how much can the bank lend out?

Accepted Answer

The bank can lend out its excess reserves, which are $41,000,000.

Question 17

Suppose that the Bank of Apples has excess reserves of $450,000 and checkable deposits of $30,000,000.If the bank has a reserve requirement of 30 percent,what is its total amount of reserves?

Accepted Answer

The reserve requirement percentage is 30%. Therefore, the required reserves of the Bank of Apples are $(30,000,000 x 0.30) = $9,000,000. Since the bank already has excess reserves of $450,000, the total amount of reserves the bank has is equal to its excess reserves plus its required reserves or ($9,000,000 + $450,000) = $9,450,000.

Question 18

What effect does a bank's decision to hold excess reserves have on its balance sheet?

Accepted Answer

Holding excess reserves does not change the total amount of assets or liabilities on a bank's balance sheet; it simply alters the composition of the assets, increasing reserves while decreasing other assets like loans.

Question 19

Suppose that the Bank of Bananas has excess reserves of $10,000,000 and checkable deposits of $200,000,000.If the bank has a reserve requirement of 25 percent,what is its total amount of required reserves?

Accepted Answer

The answer of Suppose that the Bank of Bananas has...

Question 20

If a bank that faces a 25 percent reserve ratio received a deposit of $30,000 and makes a loan to a customer for $10,000,what is the consequence if the bank then deposits the rest of the funds at the Federal Reserve?

Accepted Answer

The initial deposit of $30,000 increases both the bank's required reserves and its excess reserves by $7,500 ($30,000 x 0.25). When the bank makes a loan of $10,000, the required reserves remain the same but the excess reserves decrease by $10,000, leaving the bank with $17,500 in excess reserves ($27,500 - $10,000). When the bank deposits the remaining funds at the Federal Reserve, the excess reserves increase by $12,500 ($30,000 - $10,000 - $7,500) and the required reserves increase by $7,500, bringing the total required reserves to $15,000 ($30,000 x 0.5). Therefore, the correct choice is C.

Quiz 30: Money and the Federal Reserve