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The Examine of Discount Rate, Calculation of Loan and Required Reserve Ratio.

1) When the discount rates fall, the cost:

1. to banks of borrowing from the Fed falls.

2. of loans between banks falls.

3. to savings and loans of borrowing money from the public falls.

4. of loans to bankers' best customers goes down.

5. of international loans falls.

2) Suppose the Fed purchases a government security from a private dealer and pays with a Fed check of $100,000. If this check is deposited by the dealer a bank with a 10 percent required reserve ratio, the bank can extend new loans in the amount of:

1. $120,000.

2. $100,000.

3. $20,000.

4. $90,000.

3) When the Fed lowers the discount rate, it:

1. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public.

2. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public.

3. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.

4. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public.

5. decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.

4) The required reserve ratio is the:

1. total amount of reserves that banks hold at all times.

2. minimum amount of reserves the Fed requires a bank to hold.

3. excess amount of reserves that a bank must hold.

4. maximum amount of reserves that banks can hold to remain liquid.

5. actual amount of reserves that banks must hold.

5) Best National Bank is subject to a 10 percent required-reserve ratio. If this bank received a new checkable deposit of $1,000, it could make new loans of:

1. $1,000.

2. $10,000.

3. $100.

4. $900.

6) Banks that wish to borrow required reserves can turn to the federal funds market.

1. True

2. False

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M920795

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