True or False:
1. Financial institutions can create money by making loans.
2. If you go into a bank and borrow $1,000, the bank probably will simply add $1,000 to your checking account at the bank, but it will not create new money in the process.
3. In the absence of reserve requirements, a prudent bank would still put some limit on its loan volume.
4. Reserve requirements exist primarily to eliminate bank runs.
5. Even though banks must meet their reserve requirements, they do not want to keep any more of their funds as additional reserves than necessary for safety, because cash assets do not earn any interest.
6. The predominant liability of virtually all banks is deposits.
7. The difference between a bank's assets and its liabilities constitutes the bank's capital, or net worth.
8. Actual reserves equal required reserves minus excess reserves.