AP Macro Unit IV: Fractional Reserve Banking with Balance Sheet

A reserve requirement (ratio) is the:

• proportion of cash and security reserves the bank needs to hold.

• fraction of deposits that the bank is required to hold.

• loan to deposit ratio in the bank's balance sheet.

• money belonging to the bank's largest depositors.

• None of the answers

If on receiving a $300 deposit, the banks excess reserves increase by $285, what amount will be placed in required reserves?

• $285

• $0

• $15

• $50

• $3,000

What is the money multiplier if the reserve requirement is 25%?

• 4

• 5

• 40

• .4

• 1

If the reserve requirement is 10% and someone deposits $200, how much new money will ultimately get created once all money has been loaned out?

• $2,000

• $1,800

• $200

• $10

• $0

If the reserve requirement is 20%, how much will the bank initially hold in required reserves if a $200 checking account deposit is made?

• $100

• $20

• $40

• $160

• $0

Assume that someone deposits $100 cash into their checking account. Based upon only that transaction, how much did the money supply change (M1)?

• $100

• $0

• $10

• $90

• Indeterminate

Increasing the reserve requirement would cause banks to:

• lend out more

• lend out less

• lend out the same amount

• increase government spending

• decrease government spending

Who sets the reserve requirement?

• Federal Reserve

• Congress

• White House

• SunTrust

• BB & T

If $600 is deposited into a checking account and the reserve requirement is 40%, what will be the maximum change in the money supply once all money is loaned out?

• $900

• $600

• $0

• $1,500

• $4,000

If the reserve requirement is 50%, what is the money multiplier?

• 50

• 5

• 2

• 1

• 0