Econ 203 Chapter 11 || All Answers Are Correct 100%.
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Course
Econ 203
Institution
Econ 203
What does the amount of money you hold in your wallet include? correct answers currency (the bills and coins in your wallet) and demand deposits (the balance in your checking account)
Who influences the quantity of demand deposits and money supply? correct answers Banks influence the quantity of...
Econ 203 Chapter 11 || All Answers Are Correct 100%.
What does the amount of money you hold in your wallet include? correct answers currency (the
bills and coins in your wallet) and demand deposits (the balance in your checking account)
Who influences the quantity of demand deposits and money supply? correct answers Banks
influence the quantity of demand deposits, since demand deposits are held in banks
In a world with no banks at all what is the only form of money correct answers currency
what is a depository institution correct answers it only accepts depostis and not loans
what are reserves? correct answers deposits that banks have received but have not loaned out
what is a t-account correct answers a simplified accounting statement that shows a bank's assets
and liabilities
what are a banks assets correct answers the reserved it holds in its vault
What are a bank's liabilities? correct answers deposits
what is a balance sheet correct answers an acconting statement when the assets equal libailities
what happens if banks hold all deposits in reserves correct answers it will not change the money
supply, since each deposit in the bank reduces currency and raises demand deposits by the same
ammount
what is fractional-reserve banking? correct answers a banking system in which banks hold only a
fraction of deposits as reserves
what is reserve ratio correct answers the fraction of deposits that banks hold as reserves
what is the reserve ration influenced by correct answers the government through a set minimum
amount of reserves the bank must hold
- the bank by holding an amount above the legal minimum
What is the reserve requirement? correct answers The rule that every bank must have a certain
amount of cash and negotiable securities on hand at all times
what is excess reserve correct answers when a bank holds an amount of reserves above the legal
minimum
does making loans change the banks liabilities amount correct answers no, since they still owe
that money to depositors
, why are loans in the asset section of a t accountin correct answers because they are liabilities to
the people who borrow them, but assets to the bank since the borrowers are repaying the loans
what does money supply equal correct answers currency plus demand deposits
what happens when the bank holds a fraction of desposits in reserve correct answers the banking
system creates money
why do loans not create any additional wealth correct answers because the borrowers must pay
them back
what happens when a bank creates an asset of money correct answers it creates a liability for
those who borrowed the created money
what happens each time money is deposited and a bank loan is created correct answers the
money supply increases
what is the money multiplier correct answers the amount of money the banking system generates
with each dollar of reserves
what determines the size of the money multiplier? correct answers the money multiplier is the
reciprocal of the reserve ratio, so the reserve ratio determines the amount of money banks create
what is R correct answers the ratio of RESERVES to DEPOSITS
what is 1/R correct answers the ratio of DEPOSITS to RESERVES (money multiplier)
in 100-percent banking what is the R, 1/R correct answers R: 1 (reserve ratio)
1/R: 1 (money multiplier)
no money is created
what are ways banks can get finanacial resources correct answers - accepting deposits
- equity
- debt
- buying finacial securities
what is bank captial correct answers the resources a banks owner have put into the institution that
come from issuing equity
what is the purpose of the financial resources the bank has correct answers to generate profit for
owner
what are financial securities correct answers stocks and bonds
what is a banks liabilities and capital correct answers liabilities
- debt
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