1. Suppose the required reserve ratio is 5%. If Caitlin deposits $500 into her checking account, her bank can increase loans by: A} $450. E} 525. C} S475. D} $10000. Use the following to answer question 2: man $10,000,000 _ All Other Banks 2. Refer to the table above. Bank 1 has received a deposit of $10,000,000. The reserve requirement is 10 percent. If the banks retain no excess reserves, then the total amount of loans that Bank 2 can make equals A} stonooonoo. E} susonoo. (3} $3,100,010. D} ssaoonoo. 3. Assume a reserve requirement of 20 percent. If a hank has zero excess reserves and $100,000 in total cash reserves, then its deposits must equal A} $100,000. B} 520,000. (3} $30,000. D} $500,000. 4. Assume that the banks in an economy initially hold 15% of their deposits as reserves. Suddenly, they decide to instead hold 10% of their deposits as reserves. Then, A} the money multiplier will decrease and the supply of money in the economy will decrease B} the money multiplier will decrease and the supply of money in the economy will increase (3} the money multiplier will increase and the supply of money in the economy will decrease D} the money multiplier will increase and the supply of money in the economy will increase 5. If the Fed purchases government securities: A) the money supply is likely to decrease. B) the money supply is likely to increase. the money supply is not likely to change. D) the federal funds rate must increase. 6. Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The banks loans, if sold at current market value, would be worth $600 million. What is the total value of Stealth bank's assets? $1.3 billion B) $1,670 billion C) $970 million D) $620 million 7. Suppose the required reserve ratio is 10%. If the Fed purchases $16 billion of government securities, by how much could total deposits in the banking system increase? A) $1.6 billion B) $14.4 billion C) $80 billion D) $160 billion Use the following to answer question 8: Balance Sheet Arizona Savings Bank Assets Liabilities Buildings $1,000,000 Checking accounts $6,000,000 U.S. Bonds $4,000,000 Savings accounts $4,000,000 Cash Reserves $3,000,000 Loans $2,000,000 Total Assets $10,000,000 Total Liabilities $10,000,000 Assume that the reserve requirement is 20 percent on all deposit liabilities. 8. Refer to the balance sheet above. How much more can Arizona Savings Bank lend? A) $5,000,000 $3,000,000 C) $2,400,000 $1,000,000 9. Decisions about fiscal policy are made by the Fed. A) True B) False10. Bank reserves are the currency banks hold in their vaults minus their deposits at the Federal Reserve. A) True B) False 1 1. A decrease in the reserve requirement reduces the ability of the banking system to increase the money supply. A) True B) False 12. Counted among the unemployed are part-time workers who are looking for a full-time job. A) True B) False