20. One reason why banks are required to deposit a minimum amount of reserves at
ID: 1173398 • Letter: 2
Question
20. One reason why banks are required to deposit a minimum amount of reserves at the Federal Reserve is so that a. banks will have more liquidity. b. banks will be able to make more loans. c. depositors will feel their deposits are protected. d. the Federal Reserve can own a portion of all banks they regulate. e the Federal Reserve can control the ability of banks to lend money to others. 21. 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. $40,000 b. $10,000 c. d. $7,500 e. $2,500 22. 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? a. $40,000 b. $15,000 c. $100,000 d. $60,000 e. $0 23. 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? a. $100,000 b. $60,000 c. $40,000 d. $15,000 e. $O 24. As a discipline, economics is best described by which of the following? a. the study of how to control the effects of government actions b. the study of how to control the preferences of consumers so that there will be enough resources to produce all the goods and services that consumers want c. the study of how to use scarce resources to satisfy unlimited wants and needs d. the study of how to dispose of excess goods and services that nobody wants e. the study of how to maximize profits for firms 25. 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? a. $13,500,000 b. $30,000,000 c. $43,500,000 d. $45,000,000 e. $145,000,000 26. In a fiat money economy, money is created when a. money in a savings account is transferred to a checking account. b. more gold is discovered. c. banks make deposits at the Federal Reserve. d. individuals store cash at home instead of depositing it in the bank. e. commercial banks make loans.Explanation / Answer
(20) (a)
Required reserves provide commercial banks with higher liquidity.
(21) (d)
For this bank, Required reserves ($) = Deposit x Reserve ratio = 10,000 x 25% = 2,500
Maximum loan ($) = Excess reserves = Deposit - Required reserves = 10,000 - 2,500 = 7,500
(22) (a)
Required reserves ($) = Deposit x Reserve ratio = 100,000 x 40% = 40,000
(23) (b)
Required reserves ($) = Deposit x Reserve ratio = 100,000 x 40% = 40,000
Maximum loan ($) = Excess reserves = 100,000 - 40,000 = 60,000
(24) (c)
Economics deals with decision making process of using scarce resources to satisfy needs and wants of consumers that are unlimited.
(25) (d)
Maximum loan equals the amount of existing excess reserves.
(26) (e)
Commercial banks create money by credit lending process.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.