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Exam 3_Exam 3 – Money and Banking Fall 2008 – CutlerMULTI(4)
Updated:2012-03-29 Category:money

B) deposits; larger

C) currency; smaller

D) currency; larger

Answer: C

30) Total reserves minus bank deposits with the Fed equals

A)vault cash.

B)excess reserves.

C)required reserves.

D)currency in circulation.

Answer: A

31) Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and one million dollars in required reserves. Given this information, we can say First National Bank has ________ million dollars in excess reserves.

A) three

B) nine

C) ten

D) eleven

Answer: B

32) Suppose that from a new checkable deposit, First National Bank holds eight million dollars on deposit with the Federal Reserve, one million dollars in required reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has ________ million dollars in vault cash.

A) two

B) eight

C) nine

D) ten

Answer: A

33) When banks borrow money from the Federal Reserve, these funds are called

A) federal funds.

B) discount loans.

C) federal loans.

D) Treasury funds.

Answer: B

34) ________ the Federal Reserve earn income while ________ the Federal Reserve cost nothing.

A) Currency in circulation by; assets of

B) Reserves of; assets of

C) Liabilities of; assets of

D) Assets of; liabilities of

Answer: D

35) When a bank buys a government bond from the Federal Reserve, reserves in the banking system ________ and the monetary base ________, everything else held constant.

A)increase; increases

B)increase; decreases

C)decrease; increases

D)decrease; decreases

Answer: D

36) When the Fed buys $100 worth of bonds from First National Bank, reserves in the banking system

A) increase by $100.

B) increase by more than $100.

C) decrease by $100.

D) decrease by more than $100.

Answer: A

37) If a member of the nonbank public sells a government bond to the Federal Reserve in exchange for currency, the monetary base will ________, but ________.

A) remain unchanged; reserves will fall

B) remain unchanged; reserves will rise

C) rise; currency in circulation will remain unchanged

D) rise; reserves will remain unchanged

Answer: D

38) When the Federal Reserve extends a discount loan to a bank, the monetary base ________ and reserves ________.

A) remains unchanged; decrease

B) remains unchanged; increase

C) increases; increase

D) increases; remain unchanged

Answer: C

39) A decrease in ________ leads to an equal ________ in the monetary base in the short run.

A) float; increase

B) float; decrease

C) Treasury deposits at the Fed; decrease

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