1. Which of the following is true? a. The FDIC sets the reserve requirements for

Question

1. Which of the following is true?
a. The FDIC sets the reserve requirements for commercial banks.
b. The Federal Reserve System guarantees the deposits in almost allbanks up to a
$1,000,000 limit per account.
c. Since the Federal Reserve System was established in 1913, bankfailures due to panic
withdrawals have been virtually eliminated.
d. If a bank should fail, the FDIC guarantees that depositors canget their funds up to a
$100,000 limit per account.

2. Checkable deposits are:
a. included in both M1 and M2.
b. included in M1 but not M2.
c. included in M2 but not M1.
d. not included in either M1 or M2.

3. Credit card balances are:
a. included in both M1 and M2.
b. included in M1 but not M2.
c. included in M2 but not M1.
d. not included in either M1 or M2.

4. Suppose the XYZ bank has excess reserves of $4,000 and demanddeposits of $80,000. If the required reserve ratio is 25 percent,the banks total reserves equal:
a. $16,000.
b. $20,000.
c. $24,000.
d. $84,000.
e. $96,000.

5. When is a particular bank in a position to make new loans?
a. When required reserves equal actual reserves.
b. When required reserves exceed actual reserves.
c. When required reserves are less than actual reserves.
d. When required reserves equal excess reserves.

6. If the required reserve ratio was 25 percent, after depositing$16,000 in currency in a demand deposit
account at a bank that previously had zero excess reserves:
a. it could now issue $64,000 of new loans.
b. it could now issue $16,000 of new loans.
c. it could now issue $12,000 of new loans.
d. it could now issue $4,000 of new loans.
e. it would be unable to issue any new loans.

Explanation / Answer

2.A 3.C 4.C 5.B 6.B

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