Question 2 (3 points) If an individual bank receives $100,000 in new deposits an

Question

Question 2 (3 points) If an individual bank receives $100,000 in new deposits and the required reserve ratio is 10 percent, the bank must keep the following amount of required reserves with the Fed?

Question 2 options:

$90,000.

$1,000,000. '

Zero.

$10,000.

Save Question 3 (3 points) Assume that the Fed purchases $10 million in bonds from a bank, the monetary base will: Question 3 options:

Increase by $10 million.

Remain unchanged.

Decrease by $10 million.

Increase by $5 million.

Save Question 4 (3 points) When we say that money has a function as a medium of exchange, this implies that: Question 4 options:

Money must be in the form of a precious metal such as gold.

Money must be set at a fixed exchange rate in international currency markets.

Money is backed by the gold standard.

Money is used to purchase goods and services rather than resorting to barter.

Save Question 5 (3 points) Which of the following is not considered an asset for a bank: Question 5 options:

Customer deposits.

U.S. government treasury bills.

Corporate loans.

U.S. government issued debt.

Explanation / Answer

Question 2 :

The required reserve ratio is the percentage of a bank's total deposits that it must keep as reserves at the Federal Reserve Bank. If the required reserve ratio is 10% the bank must keep $10,000 with the Federal Reserve (10% * $100,00).

The correct ans is D) $10,000.

Question 3 :

If the Fed purchase $ 10 million in bonds from the bank then the monetary base will increase by $10 million.

It is so because when Fed buys bonds from bank so it will give money to the bank for buying the bonds so the monetary base will increase by $10 million.

Correct ans is a) increased by $10 million.

Question 4 :

Money has a function as a medium of exchange this implies that money is used to purchase goods and services rather than resorting to barter.

It is so be because the money as a medium of exchange use to buy or sell goods in exchange of money rather than in exchange of other good ( as barter system).

So the correct ans is D)

Question 5:

Customer deposit is not consider as an assets for a bank.

It is so because the customer deposit are liabilities on the bank, the deposited could come any time to take his/her money out of withdraw of money so it is not an asset for the banks.

Correct ans is a) .

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