6. An important routine function of the Federal Reserve Bank is to: A. supervise the liquidation of the assets of bankrupt state banks. B. help large commercial banks develop correspondent relationships with smaller commercial banks. C. advise commercial banks as to the most profitable ways of reinvesting profits. D. provide facilities by which commercial banks and thrift institutions may collect checks. E. All of the above

6. An important routine function of the Federal Reserve Bank is to: A. supervise the liquidation of the assets of bankrupt state banks. B. help large commercial banks develop correspondent relationships with smaller commercial banks. C. advise commercial banks as to the most profitable ways of reinvesting profits. D. provide facilities by which commercial banks and thrift institutions may collect checks. E. All of the above

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter12: Money, Banking And The Financial System

Section: Chapter Questions

Problem 15QP

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6. An important routine function of the Federal Reserve Bank is to: A. supervise the liquidation of the assets of bankrupt state banks. B. help large commercial banks develop correspondent relationships with smaller commercial banks. C. advise commercial banks as to the most profitable ways of reinvesting profits. D. provide facilities by which commercial banks and thrift institutions may collect checks. E. All of the above
Which of the following institutions oversees the safety and stability of the U.S. banking system? a. Office of the Comptroller of the Currency b. Federal Financial Institutions Examination Council c. Federal Open Market Committee d. The Federal Reserve
Considering state chartered banks: A. Most elect to join the Federal Reserve System B. Those with assets exceeding $100 million must join the Federal Reserve System C. Most elect not to join the system D. Only those that join the system must abide by reserve requirements
(Figure: Monetary Policy I) Use Figure: Monetary Policy I. If the economy is initially in equilibrium at E2, and the central shift to bank buys Treasury bills, a(n) gap. Aggregate price level, P P₂ P1 AD₂ will; the right, causing; inflationary AD₁ will; AD2, closing; recessionary AD₁ will; the left, increasing; recessionary AD₂ will; AD₁, causing; recessionary E1 LRAS E2 AD1 Y₁ YE = potential output SRAS AD 2 Real GDP
7. What is the required reserve ratio? A) The suggested percentage of total deposits that a bank should keep on reserve B) The legally mandated percentage of total deposits that a bank must keep on reserve. C) The legally mandated percentage of total deposits that a bank must send to the federal reserve bank D) The legally mandated percentage of total deposits that a bank may invest 8. What are excess reserves? A) The amount banks must keep on hand for customers B) Total reserves plus required reserves C) The amount banks can safely invest in high risk activities D) Total reserves minus required reserves
The table below is the balance sheet for all the banks combined in the banking system. Assets Liabilities/Equity $ 75,000 $ 750,000 Demand deposits Shareholders’ equity Reserves Loans 675,000 75,000 Securities 45,000 Fixed assets 30,000 Total $825,000 Total $825,000 a. Which one of the above figures is part of the money supply? (Click to select). v worth $ are included in money supply. b. If all banks maintain 100% reserves, what happens to the money supply if $400 cash is deposited into one of the banks in the system? Money supply would (Click to select) v C. If none of the banks maintain reserves, what happens to the money supply if $400 cash is deposited into one of the banks in the system? Money supply would (Click to select)
The balance sheet of Nationa Bank is shown below (assume a legal reserve ratio of 10%): Assets Liabilities & Net Worth Reserves 90,000 Checkable Deposits 500,000 Cash 20,000 Stock Shares 270,000 Loans 125,000 Securities 235,000 Property 300,000 1. Based on the balance sheet above, how much money can the bank create? 2. If the bank creates the full amount possible, how much money can the banking system create as a result? 3. If the Federal Reserve raises the reserve ratio to 20%, how much will the bank and banking system be able to create based on the new reserve ratio?
The table below is the balance sheet for all banks combined in the banking system. All banks have a target reserve ratio of 2.5%. Assets Reserves Loans Securities Fixed assets Total $160,000 $ 5,226,500 675,000 688,500 6,750,000 Liabilities/Equity Demand Deposits Shareholders equity Total $6,075,000 $ 675,000 6,750,000 a. The amount of excess reserves is $ b. The maximum amount that loans and deposits could be increased by is $ c. Assume that the system becomes fully loaned up. Show the new balance sheet in the table above. d. Now that the system is fully loaned up, the money supply will have increased by $
Big bucks bank Assets Liabilities Total reserves $30mm demand deposits $190mm Loans $100mm Bonds $100mm Stockholder equity $40 mm Suppose the required reserve ratio is 10%. What is the maximum amount of money Big buck bank can create? If the reserve ratio is increased to 14%, what is the maximum amount of money BBB can create? 3 If the reserve ratio is still at 10% and BBB chose to buy bonds instead of making loans with its excess reserves, what is the maximum amount of money BBB can create? a) From question #1 & #3, if the prospective Loans and Bonds both paid interest of 6.8%, which strategy would be more profitable for BBB? b) If BBB decided to pursue #1 as a strategy, what is the maximum money making potential of the banking…
Discuss the relevant regulatory reforms that has been implemented in the banking sector to make it more resilient.
5. Explain the similarities and differences between the European System of CentralBanks and the Federal Reserve System.
Which of the following statements is NOT true? A. The banking sectors in Canada and the UK are dominated by a few large banks. B. The US banking industry is less competitive than the banking sectors in other advanced economies. C. Relative to other US industries, there are a large number of small banks.