QUESTION 21 Bank panics have largely disappeared in the United States because of

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QUESTION 21 Bank panics have largely disappeared in the United States because of low interest rates. banks are now required to hold at least 75% of deposits as reserves. Obank loans are more closely monitored by the Federal Reserve. O of deposit insurance. QUESTION 22 Banks create money by printing money up to their required reserve limit printing dollar bills without limit creating deposits without limit making loans and creating deposits, a process that is limited by the size of banks' excess reserves. QUESTION 23 if the required reserve ratio is 7 percent and a bank has $10,000 of deposits, then its reserves are $930 $7,000. $7 $700 QUESTION 24 If the bank of Waterloo receives a $10,000 deposit and the reserve requiremant is 10 percent, how much can the bank loan out before the deposit this bank is just meeting its legal reserve requirement.) $1,000 $9,000 $10,000 $11,000

Explanation / Answer

21. Bank panics have decreased in US largely because of deposit insurance.

OPTION D

22. Banks make loans by making loans, creating deposits

OPTION D

23. Reserves = reserve requirement ratio * deposits = 7% * $10,000 = $700

OPTION D

24. Amount that bank can loan out = total deposits - (reserve requirement ratio * deposits)

= 10,000 - (10% * 10,000) = $9,000

OPTION B

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