THE MONETARY MULTIPLIER

a1.The total amount of reserves in the banking system is equal to the ________ required reserves
and excess reserves.
A) sum of
B) difference between
C) product of
D) ratio between

c2.The total amount of required reserves in the banking system is equal to the ________ the
required reserve ratio and checkable deposits.
A) sum of
B) difference between
C) product of
D) ratio between

c3.Everything else held constant, an increase in the required reserve ratio on checkable deposits
will cause
A) the money supply to rise.
B) the money supply to remain constant.
C) the money supply to fall.
D) checkable deposits to rise.

b4.Everything else held constant, a decrease in the required reserve ratio on checkable deposits
causes the M1 money multiplier to ________ and the money supply to ________.
A) decrease; increase
B) increase; increase
C) decrease; decrease
D) increase; decrease

b5.Everything else held constant, a decrease in the currency-checkable deposit ratio will mean
A) an increase in currency in circulation and an increase in the money supply.
B) an increase in money supply.
C) a decrease in the money supply.
D) an increase in currency in circulation but no change in the money supply.

Answers: ACCBB
TRANSACTION 5
TRUE OR FALSE

False 1.) When a bank accepts deposits of cash, the composition of the money supply and its total
supply is altered.

False 2.) Commercial banks and thrifts are not obliged to keep required reserves equal to a
specified percentage of their own deposits.

True 3.) The amount by which a bank's actual reserves exceeds its required reserves is called
"excess reserve."

False 4.) A bank that has a check drawn and collected against it will lose to the recipient bank both
reserves and deposits equal to the value of the cash.

False 5.) Bank employers are the one responsible for clearing and collecting the checks.
TRANSACTION 4:
1. A
Is a type of financial institution that accepts deposits, offers checking account services, makes
business, personal and mortgage loans, and offers a basic financial products
A. Commercial Banks
B. Retail Banks
C. Central Bank
D. Investment Bank

2. A
Basic purpose of reserves is to enhance the liquidity of a bank and protect commercial bank
depositors from losses
A. Control
B. Protection
C. Authority
D. Power

3. A
Capital reserves held by a bank or financial institution in excess of what is required by regulators,
creditors or internal controls
A. Excess Reserves
B. Reserves
C. Required Reserves
D. Hold Excess Reserves

4. A
Formula of Excess Reserves
A. Actual Reserves - Required Reserves
B. Require Reserves - Actual Reserves
C. Actual Reserves + Required Reserves
D. Required Reserves + Total Deposits On Hand

5. A
The ratio / portion of depositor balances that banks must have in hand as cash
A. Reserve Ratio
B. Liquid Asset Ratio
C. Current Ratio
D. Cash Flow Margin Ratio
a1. Assume that SIC Inc. writes a P50 000 check on its account at Metro National Bank to repay
the balance on a loan issued by this bank. As a result of this transaction:
A.the money supply declines by P50 000
B. the money supply increases by P 50 000
C. the banks excess reserves will decrease by P50 000
D. the banks required reserves will increase by P50 000

a2. The basic functions of Commercial Banks

a. to make money and to make loans
b. to accept deposits of money
c. to make loans
d. to accept deposits of money and make loan

a3.If a customer deposits P10 000 in currency into a checking account, the banks total
money____.
A .increase
B.do not change
C. greater than 100 percent
D. decrease
d4. When a customer deposits P 35 000 cash into his checking account at the bank, the money
supply
A. increases by P35 000
B.increases by P35 000 times the multiplier
C. decreases by P35 000
D. Do not change
a5. Assume that Jones deposits P500 in currency into her checkable deposit account in First
National Bank. A halfhour later Smith obtains a loan for P750 at this bank. By how much has the
money supply changed?
A. increased by P750
B. increased by P250
C. decreased by P750
D. decreased by P250
1. A statement of assets and claims on assets that summarizes the financial position of the bank at
a certain time
a. Net worth
b. Assets
c. Cash flow
d. Balance sheet
2. Liabities is the claims of owners of the firm against the firm's assets
A. True
B. False
3. Net worth is the claims of the nonowners against the firm's asset
A. True
B. False
4. It is a cash held by a bank
A. Vault cash
B. Bank assets
C. Federal funds
D. Wault cash
5. The operation of a commercial bank can understood through its balance sheet, where assets
equal liabilities plus net worth
A. True
B. False

Ans: DBBAA
1. There is a need for comparison of the value of money in different countries and in the definition
of the measure of their exchange with each other.

A. TRUE
B. FALSE

2. The reversibility of the national currency is not a condition and prequisite for developing the
process of integration of the world economy.

A. TRUE
B. FALSE

3. One of the radical directions of ordering the reversibility of the national currency is

A. Switched to a single international currency

B. Give up their national currency
C. Replacing them with the dollar only
D. To abandon them and go to a group, a single currency for several countries

4. It refers to not just the "veil" of the economy?

A. Dollar
B. Money
C.Coins
D.Currency

5. It is created when banks make loans and it is destroyed when loans are paid off.

A.Checkable Deposit
B.Checks
C. Loan Repayment
D.Cash
1. What is the meaning of FOMC?
a. Federal Open Marketing Company
b. Federal Open Market Committee
c. Federal Open Market Cyber
d. Federal Open Market Consistent

2. What is the goverment bond?

a. is a bond issued by a national government, generally with a promise to pay periodic interest
payments and to repay the face value on the maturity date.
b. are issued by the federal government to finance its budget deficits
c. issued by companies or financing vehicles with relatively strong balance sheets.
d. bonds are issued by companies or financing vehicles with relatively weak balance sheets.

3. Open market operations (OMO) refers to?

a. the monetary policy making body of the Federal Reserve System
b. set the money supply
c. the buying and selling of government securities in the open market in order to expand or
contract the amount of money in the banking system, facilitated by the Federal Reserve
d. the face value on the maturity date.

4. How many times does FOMC conduct a meeting?

a. two meetings per year, one about every 3 weeks.
b. Five meetings per year, one about every 5 weeks.
c. eight meetings per year, one about every six weeks or so.
d. three meetings per year, one about every eight weeks or so.

5. The FOMC is composed of how many members?

a. 10 members
b. 12 members
c. 14 members
d. 13 members

1.) The people deposited their gold with goldsmiths, and it is stored in?
a. Room
b. Vault
c. Storage room
d. Bank

2.) The fractional reserve system of banking started when goldsmiths began
a. Accepting deposits of gold for safe storage.
b. Issuing receipts for the gold stored with them.
c. Using deposited gold to produce products for sale to others.
d. Issuing paper money in excess of the amount of gold stored with them.

3.) A banking system in which only a fraction of bank deposits are backed by actual cash on hand
and are available for withdrawal. This is done to expand the economy by freeing up capital that
can be loaned out to other parties.
a. Fractional reserve system.
b. Fractional reserve deposits.
c. Fractional reserve banking
d. Fractional reserve of gold.

4.) One reason why banking system are highly regulated industries is to prevent
a. Shortage of deposits
b. Withdrawal
c. Bank runs
d. Bankruptcy

5.) Their has two significant characteristics of fractional reserve banking, which is true.
I. Banks can create money through deposits.
II. Banks operating on the basis of fractional reserve are vulnerable to techniques.
a. I only
b. II only
c. Either I or II
d. Neither I or II