Chapter 15: Q2. (page 319)
A commercial bank has \(100 million in checkable-deposit liabilities and \)12 million in actual reserves. The required reserve ratio is 10 percent. How big are the bank’s excess reserves?
\(100 million
\)88 million
\(12 million
\)2 million
The correct answer is d) $2 million.
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Suppose that Serendipity Bank has excess reserves of \(8,000 and checkable deposits of \)150,000. If the reserve ratio is 20 percent, how much does the bank hold in actual reserves?
Explain why merchants accepted gold receipts as a means of payment even though the receipts were issued by goldsmiths, not the government. What risk did goldsmiths introduce into the payments system by issuing loans in the form of gold receipts?
Suppose that the banking system in Canada has a required reserve ratio of 10 percent while the banking system in the United States has a required reserve ratio of 20 percent. In which country would $100 of initial excess reserves be able to cause a larger total amount of money creation?
Canada
United States
Suppose that the Fed has set the reserve ratio at 10 percent and that banks collectively have \(2 billion in excess reserves. What is the maximum amount of new checkable-deposit money that can be created by the banking system?
\)0
\(200 million
\)2 billion
$20 billion
“Whenever currency is deposited in a commercial bank, cash goes out of circulation and, as a result, the supply of money is reduced”. Do you agree? Explain why or why not.
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