True or False:
1. Banks earn no interest on reserves, whether kept as cash on hand or in accounts with the Federal Reserve.
2. If a bank lends out its excess reserves of $90,000, at the time the loan is made the money supply will increase by $90,000.
3. When banks create more money, they also directly create wealth.
4. New loans create new money directly, but they also create excess reserves in other banks, which leads to still further increases in both loans and the stock of money.
5. Assume that Bank One receives a new cash deposit of $100,000. With a 10 percent required reserve ratio, this creates $10,000 of required reserves and $90,000 of excess reserves.
6. The money multiplier is 1 divided by the required reserve ratio.
7. The higher the required reserve ratio, the larger the money multiplier.
8. If some banks choose not to lend all of their excess reserves, the total amount of money created by an initial cash deposit will be smaller.
9. When a person pays a loan back to a bank, demand deposits decline, directly reducing the money supply.