Exam 13: Money, Banks, and the Federal Reserve

If the required reserve ratio is 20 percent,banks loan out all excess reserves,people hold no currency,and the Fed sells $5,000 worth of bonds to banks,what is the ultimate impact on the money supply?

The Federal Reserve

A banking panic occurs when

If the Federal Reserve buys $1,000 in bonds and the reserve requirement ratio is 0.5,what happens to the money supply and the net worth of all banks?

The formula for determining changes in demand deposits is the reciprocal of the required reserve ratio (i.e. ,1/RRR)multiplied by the change in reserves.

All items on a bank's balance sheet are stock variables.

Which of the following is a cost of providing federal deposit insurance?

Federal Deposit Insurance Corporation protection of deposits

If the Federal Reserve wishes to increase the money supply by $30,000 and the reserve requirement ratio is 0.4,how big a purchase of bonds will the Fed need to make?

Every time a bank calls in a loan,demand deposits are created.

Which of the following is the least liquid asset?

Why were banking panics and failures largely eliminated after 1933?

Which of the following is a liability of a commercial bank?

Financial intermediaries are important because

Demand deposits are liabilities to a bank because

Which of the following is the most liquid asset?

Deleveraging is the process of reducing leverage,and therefore increasing the risk to capital from any further declines in asset prices.

Reserves are defined as

Open market bond sales can be conducted either by the Federal Reserve or the Treasury Department,and either way the result is the same.

It was the banking panic of _____ that convinced Congress to establish the Federal Reserve System.