1. Suppose a commercial bank has checkable deposits of $100,000 and the legal reserve ratio is 10 percent. If the bank's required and excess reserves are equal, then its actual reserves

Multiple Choice

• are $20,000.
• are $10,000.
• are $1,000,000.
• cannot be determined from the given information.

2. A reserve requirement of 10 percent means a bank must have at least $300 of reserves if its checkable deposits are

Multiple Choice

• $3,000.
• $30.
• $300.
• $30,000.

3.

Item in Balance Sheet	Amount
1) Treasury Deposits	$7
2) Reserves of Commercial Banks	31
3) Federal Reserve Notes	275
4) Loans to Commercial Banks	16
5) All Other Assets	79
6) Securities	275
7) All Other Liabilities and Net Worth	7

The table shows items and figures taken from a consolidated balance sheet of the 12 Federal Reserve Banks. All figures are in billions of dollars. In this balance sheet, there would be assets of

Multiple Choice

$369 billion.

$645 billion.

$401 billion.

$370 billion.

$377 billion.

4.

If nominal GDP is $900 billion and, on average, each dollar is spent six times in the economy over a year, then the quantity of money demanded for transactions purposes will be

Multiple Choice

• 3,600
• 150
• 900
• 750
• 450

5.

The price of a bond with no expiration date is originally $1,000 and has a fixed annual interest payment of $150. If the price of the bond then rises by $250, what will be the interest rate yield to a new buyer of the bond?

Multiple Choice

10 percent

12 percent

6 percent

15 percent

20 percent

6. A commercial bank buys a $1,000 government security from a securities dealer. The bank pays the dealer by increasing the dealer's checkable deposit balance by $1,000. The money supply has

Multiple Choice

• increased by $1,000.
• decreased by $1,000.
• not been affected.
• increased by $1,000 multiplied by the reserve ratio.

7.

Refer to the graph. If the initial equilibrium interest rate was 5 percent and the money supply increased by $50 billion, then the new interest rate would be

Multiple Choice

1 percent.

4 percent.

2 percent.

3 percent.

8.

(Advanced analysis) Assume the equation for the total demand for money is L = 0.4Y + 80 4i, where L is the amount of money demanded, Y is gross domestic product, and i is the interest rate. If gross domestic product is $350 and the interest rate is 7 percent, what amount of money will society want to hold?

Multiple Choice

220.

216.

192.

175.

350.

9. Assume that Smith deposits $300 in currency into her checking account in the XYZ Bank. Later that same day, Jones negotiates a loan for $2,400 at the same bank. In what direction and by what amount has the supply of money changed?

Multiple Choice

• increased by $2,400
• decreased by $300
• increased by $2,700
• increased by $300

10.