Question 1

When $1 million is deposited at a bank,the required reserve ratio is 20 percent,and the bank chooses not to make any loans but to hold excess reserves instead,then,in the bank's final balance sheet,

Accepted Answer

The answer of When $1 million is deposited at a...

Question 2

If a bank has excess reserves greater than the amount of a deposit outflow,the outflow will result in equal reductions in

Accepted Answer

Excess reserves are the amount of reserves that banks hold in excess of the required reserve ratio. If a bank has excess reserves greater than the amount of a deposit outflow, it means that even after the outflow, the bank still has enough reserves to meet its required reserve ratio. Therefore, the outflow will only result in equal reductions in deposits and reserves.

Question 3

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then

Accepted Answer

When the check is deposited, the First National Bank of Chicago must transfer $10 from its reserves to Citibank, effectively reducing its liabilities because a check is a demand on the bank's liabilities.

Question 4

A deposit outflow results in equal reductions in

Accepted Answer

When there is a deposit outflow, it means that funds are leaving the bank. This results in a reduction of assets (the funds that have been deposited) and liabilities (the obligation of the bank to repay those deposits). Both the assets and liabilities decrease by the same amount, resulting in a balanced reduction.

Question 5

When you deposit $50 in your account at First National Bank and a $100 check you have written on this account is cashed at Chemical Bank,then

Accepted Answer

When you deposit $50 in your account at First National Bank, the bank's reserves increase by $50. However, when your $100 check is cashed at Chemical Bank, it will be debited from First National Bank's account, causing their reserves to decrease by $100. Since the deposit and the check are on the same account, they offset each other and do not affect the assets or liabilities of the banks. Thus, choice C is the correct answer.

Question 6

Using T-accounts show what happens to reserves at Security National Bank if one individual deposits $1000 in cash into her checking account and another individual withdraws $750 in cash from her checking account.

Accepted Answer

The answer of Using T-accounts show what happens to reserves...

Question 7

Bankers' concerns regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Fed,and borrowings from other banks to deal with deposit outflows is an example of

Accepted Answer

Bankers' concerns regarding the optimal mix of excess reserves, secondary reserves, borrowings from the Fed, and borrowings from other banks are related to liquidity management. This involves managing the bank's ability to meet its short-term obligations and maintain its financial stability in the face of unexpected deposit outflows. Liabilities such as deposits are a major source of funding for banks, and managing their liquidity is critical to their overall financial health.

Question 8

If a bank has $200,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $80,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

Accepted Answer

The answer of If a bank has $200,000 of checkable...

Question 9

Which of the following are primary concerns of the bank manager?

Accepted Answer

Bank managers are primarily concerned with maintaining sufficient reserves to manage deposit outflows efficiently, ensuring liquidity and stability.

Question 10

A $5 million deposit outflow from a bank has the immediate effect of

Accepted Answer

A deposit outflow means that money is leaving the bank, so both deposits and reserves will decrease by the same amount. Loans, securities, and capital will not be affected by the deposit outflow.

Question 11

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then

Accepted Answer

When a check written on one bank is deposited in an account at another bank, the second bank processes the check and receives the funds from the first bank. Therefore, the liabilities of Citibank increase by $10 as it owes the depositor an additional $10, and there is no impact on the assets or liabilities of the First National Bank.

Question 12

Holding all else constant,when a bank receives the funds for a deposited check,

Accepted Answer

The answer of Holding all else constant,when a bank receives...

Question 13

If,after a deposit outflow,a bank needs an additional $3 million to meet its reserve requirements,the bank can

Accepted Answer

Selling securities is the most viable option for a bank to raise funds when it needs to meet its reserve requirements. This is because selling securities provides a quick and relatively easy way for the bank to raise funds without affecting its deposit base or loan portfolio. Additionally, selling securities helps to maintain the bank's liquidity and ensures that it remains in compliance with regulatory requirements. The other options may not be feasible as reducing deposits or repaying discount loans could impact the bank's balance sheet, while increasing loans could increase the risk of asset quality deterioration.

Question 14

If a bank has $100,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $40,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

Accepted Answer

The answer of If a bank has $100,000 of checkable...

Question 15

Of the following,which would be the first choice for a bank facing a reserve deficiency?

Accepted Answer

Borrowing from other banks in the federal funds market is typically the first choice for banks facing a reserve deficiency because it is often the quickest and most cost-effective method.

Question 16

When you deposit $50 in currency at Old National Bank,

Accepted Answer

When you deposit $50 in currency at a bank, the bank's liabilities increase by $50 because the bank owes you, the depositor, the amount you deposited. Reserve requirements affect how much of the deposit the bank must keep in reserve, not the increase in liabilities.

Question 17

A bank with insufficient reserves can increase its reserves by

Accepted Answer

Calling in loans increases a bank's reserves because it converts loans (assets that are not liquid) into cash, which directly boosts the bank's reserves. Other options either do not directly affect reserves or, in the case of lending federal funds, would actually decrease reserves.

Question 18

If a bank has $10 million of checkable deposits,a required reserve ratio of 10 percent,and it holds $2 million in reserves,then it will not have enough reserves to support a deposit outflow of

Accepted Answer

The answer of If a bank has $10 million of...

Question 19

With a 10% reserve requirement ratio,a $100 deposit into New Bank means that the maximum amount New Bank could lend is

Accepted Answer

With a 10% reserve requirement ratio, New Bank is required to keep 10% of the $100 deposit ($10) as reserves and can lend out the remaining 90% ($90). Therefore, the maximum amount New Bank could lend is $90, and the correct answer is choice A.

Question 20

When $1 million is deposited at a bank,the required reserve ratio is 20 percent,and the bank chooses not to hold any excess reserves but makes loans instead,then,in the bank's final balance sheet,

Accepted Answer

The liabilities of the bank increase by $1,000,000 because the deposit itself is a liability for the bank. The bank owes this amount to the depositor.

Quiz 10: Banking and the Management of Financial Institutions

When $1 million is deposited at a bank,the required reserve ratio is 20 percent,and the bank chooses not to make any loans but to hold excess reserves instead,then,in the bank's final balance sheet,

If a bank has excess reserves greater than the amount of a deposit outflow,the outflow will result in equal reductions in

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then

A deposit outflow results in equal reductions in

When you deposit $50 in your account at First National Bank and a $100 check you have written on this account is cashed at Chemical Bank,then

Using T-accounts show what happens to reserves at Security National Bank if one individual deposits $1000 in cash into her checking account and another individual withdraws $750 in cash from her checking account.

Bankers' concerns regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Fed,and borrowings from other banks to deal with deposit outflows is an example of

If a bank has $200,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $80,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

Which of the following are primary concerns of the bank manager?

A $5 million deposit outflow from a bank has the immediate effect of

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then

Holding all else constant,when a bank receives the funds for a deposited check,

If,after a deposit outflow,a bank needs an additional $3 million to meet its reserve requirements,the bank can

If a bank has $100,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $40,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

Of the following,which would be the first choice for a bank facing a reserve deficiency?

When you deposit $50 in currency at Old National Bank,

A bank with insufficient reserves can increase its reserves by

If a bank has $10 million of checkable deposits,a required reserve ratio of 10 percent,and it holds $2 million in reserves,then it will not have enough reserves to support a deposit outflow of

With a 10% reserve requirement ratio,a $100 deposit into New Bank means that the maximum amount New Bank could lend is

When $1 million is deposited at a bank,the required reserve ratio is 20 percent,and the bank chooses not to hold any excess reserves but makes loans instead,then,in the bank's final balance sheet,