1) An individual commercial bank\'s potential loans are limited by its Select on

Question

1)

An individual commercial bank's potential loans are limited by its

Select one:

a. required dollar reserves

b. checking deposits

c. excess reserves

d. discretion as to the appropriate amount of lending it should undertake

2)

The downward slope of the demand curve illustrates the pattern that as _____________ rises, _________________ decreases.

Select one:

a. quantity demanded, price

b. quantity supplied, quantity demanded

c. price, quantity demanded

d. price, quantity supplied

3)

Given the definition of money, if you deposit cash in your bank account

Select one:

a. the money supply falls

b. the money supply increases

c. the money supply remains the same

d. checking deposits fall

4)

Which of the following would appear on the liability side of a commercial bank balance sheet?

Select one:

a. Reserves.

b. Checking deposits.

c. Loans.

d. Securities.

5)

Assume a bank has total deposits of $100,000 and $10,000 is set aside to meet reserve requirements of the Fed. Its required-reserve ratio is:

Select one:

a. $10,000.

b. 10 percent.

c. 0.1 percent.

d. 1 percent.

Explanation / Answer

1) a. required dollar reserves

From all deposits, banks are able to lend money which is left after keeping required reserves.

2) c. price, quantity demanded

Demand curve shows inverse relationship between price and quantity demanded.

3) b. the money supply increases

Banks create more money from deposits.

4) b. Checking deposits.

Because it is to be paid when demanded by depositors.

5) Required reserve ratio = 10000/100000 x 100 = 10%

b) 10 percent

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