1-) Deposit insurance: A. is essentially the same as a bank\'s required reserves

ID: 1098634 • Letter: 1

Question

1-) Deposit insurance:

A. is essentially the same as a bank's required reserves.

B. provides depositors with assurances that they will receive their deposits even if there are questions about a bank's soundness.

C. can be used only if depositors lose deposits in excess of $250,000.

D. creates more incentive for banks to carefully consider to whom they lend funds.

2-) Suppose a bank gets a new deposit of $100 cash and it has a 20% required reserve ratio. If the bank lends the maximum amount of money allowed, then the checkable deposits increase by:

A. $20.

B. $100.

C. $500.

D. $1,000.

3-) U.S. Treasury bills are a(n):

A. liability of the U.S. government but an asset to the Federal Reserve.

B. asset of the U.S. government but a liability to the Federal Reserve.

C. part of the net worth of the U.S. government.

D. liability to both the U.S. government and the Federal Reserve.

4-) Saving deposits are counted in:

A. M1 but not in M2.

B. vault cash but not in M2.

C. M2 but not in M1.

D. M1, M2, and the gold stock.

5-) The Federal Reserve reports on two main monetary aggregates:

A. M2 and total debt.

B. M1 and currency held by banks.

C. M1 and M2.

D. M1 and total stock purchases.

6-) Bank reserves are:

A. the fraction of deposits kept in gold with the Federal Reserve.

B. the deposits lent to finance illiquid investments.

C. the fraction of deposits kept in the form of very liquid assets.

D. gold kept in the bank's vault.

7-) The money supply of euros is controlled by:

A. the Bank of England.

B. the U.S. Federal Reserve System.

C. the foreign exchange markets.

D. the European Central Bank.

Explanation / Answer