BAFM 104 Final Quiz 1

A healthy economy requires the existence of private banks that are able to hold the deposits of individuals and business firms.

• True

• False

Any bank is authorized to manufacture and issue money.

• True

• False

Increase in bank reserve means decrease in money supply or vice versa.

• True

• False

When calculating money supply, economists exclude all currencies held in banks, currencies held by the government, and the checking account deposits of the government.

• True

• False

To increase money supply, banks either make fewer loans or sell more securities to the public or accept repayment of loans.

• True

• False

During inflation, the objective of the Bangko Sentral is to increase the volume of money supply.

• True

• False

During deflation, when money supply is insufficient, the percentage of legal bank reserves is decreased to induce greater credit expansion.

• True

• False

A reserve requirement protects the interest of depositors by not allowing the bank to use all the deposits for lending operations.

• True

• False

a

All banks operating in the Philippines shall be required to maintain reserves against their deposit liabilities.

• True

• False

The Monetary Board of the BSP may increase the percentage of reserve against deposit liabilities anytime without limit.

• True

• False