Banking and Money Creation Quiz

What is the initial loan amount a bank can make if the reserve requirement is 20% and a $100 deposit is made?

• $120

• $20

• $80

• $100

How is the money multiplier calculated when the reserve requirement is 20%?

• 20

• 1/20

• 1/5

• 5

What is the maximum increase in the money supply when the Federal Reserve buys $5 million worth of bonds?

• $5 million

• $10 million

• $20 million

• $25 million

Why doesn't the initial deposit count as new money created in the money supply?

• It is already part of the money supply.

• It is not loaned out.

• It is used for bank operations.

• It is held as reserves.

What happens to real wages when the Federal Reserve implements expansionary monetary policy?

• They increase.

• They fluctuate randomly.

• They decrease.

• They remain unchanged.