Econ-2.3 PART 2- Formative Assessment Option 1

Match

Match each description to the correct "Banks and Money Creation" Term.

• Banks are required to hold a specific fraction of each new deposit available for withdrawal and are free to loan out the remaining amount of the deposit.

• • The percentage of each new deposit a bank must hold onto and NOT loan out.

• • The dollar amount of each new deposit a bank must hold onto and not loan.

• • The dollar amount of each new deposit a bank is allowed to loan.

• Where money creation starts.

Fractional Reserve Banking

Required Reserve Ratio

The Required Reserves

The Excess Reserves

Banks

• Fractional Reserve Banking

• Required Reserve Ratio

• The Required Reserves

• The Excess Reserves

• Banks

Audio Response

Record a response to the following prompt:

Explain why the following statement is FALSE

We assume banks will not hold any of their excess reserves they could loan out and we assume that households will deposit most of the loans they have taken out when we find the maximum amount of money that could be created.

Open Audio Recorder

Math Response

Practicing Money Creation and Money Multiplier Problems:

Find the Money Multiplier (MM) given the following Required Reserve Ratio (SHOW ALL WORK)

Required Reserve Ratio: 25%

Type answer here

Correct Answer: 4

Deg^°

Rad

Math Response

Practicing Money Creation and Money Multiplier Problems:

Find the Money Multiplier (MM) given the following Required Reserve Ratio (SHOW ALL WORK)

Required Reserve Ratio: 50%

Type answer here

Correct Answer: 2

Deg^°

Rad

Math Response

Practicing Money Creation and Money Multiplier Problems:

Find the Money Multiplier (MM) given the following Required Reserve Ratio (SHOW ALL WORK)

Required Reserve Ratio: 15%

Type answer here

Correct Answer: 6.7

Deg^°

Rad

Math Response

1. Required Reserves Ratio = 20% & Jim deposits $12,000 into his checking account at Schriever State Bank.

What is the amount of Required Reserves (ROUND TO THE NEAREST PENNY)? SHOW YOUR WORK.

Type answer here

Correct Answer: 2400

Deg^°

Rad

Math Response

1. Required Reserves Ratio = 5% & Jim deposits $350,000 into his checking account at Schriever State Bank.

What is the maximum amount of money that could be created (ROUND TO THE NEAREST PENNY)? SHOW YOUR WORK.

Type answer here

Correct Answer: 6650000

Deg^°

Rad

Math Response

1. Forest deposits a check for $400 into his checking account. The required reserve is 10%. What is the amount of excess reserves Forest's bank has available to loan out because of his deposit?

Type answer here

Correct Answer: 360

Deg^°

Rad