Question 1

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

Required Reserve = Deposits x Required Reserve Ratio 
                    = $10,000 x 0.25 
                    = $2,500. Therefore, the correct answer is D) $2,500.

Question 2

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 answer of If a bank that faces a 10...

Question 3

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 shows the assets (loans, securities, etc.) and liabilities (deposits, borrowings, etc.) held by the bank. The balance sheet is important for assessing the ability of the bank to manage conflicting objectives, such as profitability and liquidity. Profitability is important for generating returns for shareholders, while liquidity is necessary to meet depositor demands and potential loan losses. By analyzing the composition of assets and liabilities, analysts can determine whether a bank has too many illiquid assets or relies too heavily on volatile funding sources.

Question 4

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

The answer of Sayed receives a bonus check from his...

Question 5

________ is the phenomenon when one party that is protected from risk behaves differently than if it were fully exposed to the risk.

Accepted Answer

Moral hazard is the phenomenon where one party behaves differently than if they were fully exposed to risk. This occurs because the party is protected from the consequences of their actions. For example, if a bank knows it is protected from failing due to government insurance, it may take on riskier investments, knowing it won't face the full consequences if they fail.

Question 6

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

Question 7

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

Question 8

A bank can make loans when

Accepted Answer

The answer of A bank can make loans when
...

Question 9

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 of 30 percent means that the bank is required to hold 30% of checkable deposits as reserves. So the required reserves for the Bank of Apples is 30% of $30,000,000 which is $9,000,000. Since the bank already has excess reserves of $450,000, its total amount of reserves will be $9,450,000 ($9,000,000 + $450,000). Therefore, the correct answer is option C.

Question 10

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 11

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 12

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 answer of Suppose that the Bank of Oranges has...

Question 13

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

Question 14

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

When Mena deposits her $1,000 check in the bank, the bank is required to hold a 10% reserve ratio, which means they can lend out $900 of her deposit (excess reserves increase by $900). However, when the bank deposits Mena's check at the Federal Reserve, the required reserves will increase by 10% of the initial deposit ($100). Therefore, excess reserves increase by $900 and required reserves increase by $100.

Question 15

When can a bank make loans?

Accepted Answer

Banks can make loans when they have reserves greater than the required amount. This is because the excess reserves can be used to provide loans to customers while still maintaining the required amount of reserves for regulatory purposes.

Question 16

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 of 40% means that Bank of Mateer is required to hold 40% of their $100,000 in deposits as reserves. Therefore, the amount of required reserves is 40% x $100,000 = $40,000.

Question 17

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

Accepted Answer

The answer of What effect does a bank's decision to...

Question 18

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 maximum amount of money that Bank of Mateer can loan is calculated as follows:

Maximum loan = Total deposits * (1 - Required reserve ratio) 
Maximum loan = $100,000 * (1 - 0.4) 
Maximum loan = $60,000

Therefore, the correct answer is (D) $60,000.

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 required reserve ratio is 25%, which means that the bank must hold 25% of the deposit amount in reserve.

Required reserves = $30,000 x 0.25 = $7,500

The bank made a loan of $10,000, which does not affect the reserve requirements.

Excess reserves = Total reserves - Required reserves

After making the loan, the total reserves are $30,000 - $10,000 = $20,000. Therefore:

Excess reserves = $20,000 - $7,500 = $12,500

If the bank deposits the remaining $20,000 at the Federal Reserve, excess reserves increase by $20,000, but required reserves also increase by 25% of $20,000 = $5,000.

Therefore:

Excess reserves increase by $20,000 - $5,000 = $15,000.
Required reserves increase by $5,000.

Overall, excess reserves increase by $15,000, and required reserves increase by $5,000, leading to a total increase in reserves of $20,000. Therefore, the best choice is C.

Quiz 17: Money and the Federal Reserve

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?

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?

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

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?

________ is the phenomenon when one party that is protected from risk behaves differently than if it were fully exposed to the risk.

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?

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?

A bank can make loans when

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?

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?

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?

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?

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?

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?

When can a bank make loans?

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?

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

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?

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?

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?