A $10 million open market purchase will increase bank reserves by

            $10 million times the money multiplier.

            an amount between $0 and $10 million, depending on the fraction of the purchase the public wishes to hold as currency.

            $10 million divided by the money multiplier.

            $10 million.

An ATS account

            were used during the Great Depression by depositors who had lost faith in conventional checking accounts.

            converts a corporation's checking account balance at the end of the day into an overnight RP.

            are negotiable certificates of deposit of less than $100,000.

            is the name given to NOW accounts outside of New England.

Government regulation of banks in the United States

            has remained essentially unchanged since the early twentieth century.

            changes abruptly in response to periodic financial crises.

            generally increases during election campaigns as politicians exploit the public's hostility toward banks.

            changes slowly over time as knowledge of the best way to organize the system increases.

 

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Question 4 5 pts If the Fed purchases $50,000 in T-bills from a bank, by how much will the bank's excess reserves increase?<br>

If the Fed purchases $50,000 in T-bills from a bank, by how much will the bank's excess reserves increase?

            By $50,000 divided by the required reserve ratio

            By $50,000 times the required reserve ratio

            By $50,000

            Not enough information has been provided to answer the question.

 Required reserves are equal to

            checkable deposits divided by the required reserve ratio.

            the required reserve ratio divided by checkable deposits.

            excess reserves divided by total reserves.

            the required reserve ratio times checkable deposits.

During a banking panic

            the nominal return on currency is positive.

            the nominal return on currency is negative.

            the return on checkable deposits must be greater than the return on currency, as long as market interest rates are positive.

            the return on checkable deposits may be negative.

 

Which of the following did NOT significantly exacerbate the banking crisis of the early 1930s?

            The Fed's inability to lend against anything other than good commercial loans

            The large number of rural banks that held agricultural loans during a time of falling commodity prices

            The large number of small, poorly diversified banks

            The large amount of fraud carried out by bank managers

 The British central bank is known as

            the Bank of England.

            the British Federal Reserve.

            the Bank of London.

            the Bank of the Empire.

 

During the early 1980s, regulators kept many insolvent or nearly insolvent thrifts from being closed by

            underestimating the value of goodwill that thrifts carried on their books as an asset.

            reducing the face value of many mortgages to current market value.

            allowing them to pay interest rates to depositors that were below the going market rates.

            allowing many assets to be carried on the books at face value rather than market value.

Because of the bank failures of the early 1930s, many small and medium-sized businesses were

            forced to move from bank loans to stock sales to raise funds.

            forced to rely on government loans for credit.

            forced to move from bank loans to bond sales to raise funds.

            unable to obtain credit.

The creation of a lender of last resort in the United States

            was mandated in the U.S. Constitution.

            has been recommended by the Treasury in its report of late 1992.

            occurred in response to banking panics.

            occurred in response to the S&L crisis of the 1980s.

Over periods of several years, the primary determinant of changes in the money supply is changes in

            the required reserve ratio.

            the nonborrowed monetary base.

            the money multiplier.

            discount loans.

 

An important consequence of regulations that reduce competition among banks is

            an incentive for unregulated financial institutions and markets to compete with banks.

            a sharp reduction in the number of banks.

                                                                                                                             an increase in moral hazard in banks' behavior.

            lower interest rates on bank loans than would otherwise exist.

 

The lower the amount of deposits covered by insurance,

            the likelier the managers of banks are to make risky investments.

            the greater is the incentive for depositors to monitor banks.

            the greater is the need for government regulation of banking.

            the greater the extent of moral hazard in the banking system.

All of the following are likely to lead to a decrease in the currency-deposit ratio EXCEPT

            reduction in anonymity value of cash.

            Increased wealth.

            higher risk of deposits.

            increased expected return on deposits.

 Which of the following factors contributed to the problems that banks began to face during the 1960s and 1970s?

            Banking regulations enacted during the 1930s

            Very low inflation rates

            Very low interest rates

            Prolonged periods of recession

The size of the money multiplier depends upon all of the following EXCEPT

            the currency-deposit ratio.

            the required reserve ratio.

            the discount rate.

            excess reserves relative to deposits.

 

Congress has attempted to reduce competition among banks in order to

            make the process of check clearing easier.

            reduce the chance of moral hazard in banks' behavior.

            lower interest rates charged on bank loans.

            increase the tax revenues generated from bank profits.

 The currency-to-deposit ratio will rise when

            the level of underground activity increases.

            the anonymity premium declines.

            the fear of bank runs declines.

            the expected return on deposits rises.

 

Certificates of deposit differ from demand deposits in that they

            pay non-taxable interest.

            are sold only by S&Ls.

            do not pay interest.

            have penalties for early withdrawal.

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