How do banks create new deposits by making loans, and what factors limit the amount of deposits and loans they can create? When a bank makes a loan, The amount of loans and new deposits that a bank can create is limited by OA it creates a new deposit for the person who receives the loan; the banks' excess reserves, the desired reserve ratio, and the currency drain ratio O B. the Fed prints more dollar bills; the speed at which the Fed can increase the quantity of bills in circulation and the desired reserve ratio O C. the Fed creates a new deposit for the bank; the bank's total assets and total liabilities O D. the Fed creates a new deposit for the bank; the amount of excess reserves and the desired reserve ratio O E. it creates a new deposit for the person who receives the loan; the banks total assets and total liabilities

How do banks create new deposits by making loans, and what factors limit the amount of deposits and loans they can create? When a bank makes a loan, The amount of loans and new deposits that a bank can create is limited by OA it creates a new deposit for the person who receives the loan; the banks' excess reserves, the desired reserve ratio, and the currency drain ratio O B. the Fed prints more dollar bills; the speed at which the Fed can increase the quantity of bills in circulation and the desired reserve ratio O C. the Fed creates a new deposit for the bank; the bank's total assets and total liabilities O D. the Fed creates a new deposit for the bank; the amount of excess reserves and the desired reserve ratio O E. it creates a new deposit for the person who receives the loan; the banks total assets and total liabilities

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Similar questions

Which of the following policies would the Federal Reserve most likely use if the economy was suffering from high inflation? O Decrease the required reserve rate O Buy bonds in the open market O Decrease the interest rate the Fed pays on bank reserves O Raise the discount rate
If the Fed sells the U.S. $200 million in government bonds, the total money supply will: O not change. decrease by more than $200 million. O decrease by less than $200 million but more than $0 million. O decrease by exactly $200 million.
Trevor goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base? Select one: O a. The monetary base will decline as bank reserves fall. O b. The monetary base will increase with the increase in currency in circulation. O c. The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves. O d. The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves.
The central bank sold existing government securities in an open market operation. Which of the following changes is the most likely result of this action? Select one: a. The reserve requirement decreases. O b. The nominal interest rate increases. O c. The discount rate increases O d. Bank reserves increase.
1.If you deposit $100 in a bank account and the reserve ratio is 20 percent. a.What is the minimum amount of money banks will be required to keep in reserves? How much loans can banks make at most? What is the money multiplier? How much money can be created from $100 of reserves? b.lf the fed raises the required reserve ratio to 30 percent. What is the minimum amount of money banks will be required to keep in reserves? How much loans can banks make at most? What is the money multiplier? How much money can be created from $100 of reserves? N
Suppose that commercial banks do NOT hold excess reserves. When the Federal Reserve raises the reserve requirement, the money supply will because commercial banks can make loans. O shrink; more O shrink; fewer O grow; more O grow; fewer
If Canadian Tire issues its own "money" and it becomes generally accepted by people in paying for goods and services at other stores, then we would consider it to 84 be ca htt O A. legal money because Canadian Tire is a Canadian incorporated company. O B. a form of fiat money. O C. Mlegal money because the government has not issued it O D. a form of fiduciary money As hav
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