1.

Assets Liabilities

$600 Reserves $4500 Checkable Deposits

$1000 Short Term Bonds $1500 Variable Rate CDs

$5000 Fixed Rate Home .......... Capital

Which of the following is true for the balance sheet above? The reserve requirement is 10%. The maximum equity multiplier is 10.

• A. The bank is meeting the reserve requirement
• B. The bank is insolvent
• C. The banks EM is below the maximum.
• D. All of the above are true.

2.For the bank represented in the above balance sheet, if interest rates rise by 1% in a year, bank profits will

• A. rise by $5.
• B. fall by $5.
• C. rise by $10.
• D. fall by $10.

3.During the Great Depression the Fed raised the reserve requirement causing the money multiplier to _______ and the money supply to ________ .

• A. rise; rise
• B. rise; fall
• C. fall; rise
• D. fall; fall

4.The result of the too-big-to fail policy is that ___ banks will take on ___ risks.

• A. small; fewer
• B. small; greater
• C. big; fewer
• D. big; greater