Reading 24: Money, Banks, and the Federal Reserve - LOS d,

答案和详解如下：

1.When additional or excess reserves are injected into the U.S. banking system, the money supply can potentially increase by an amount equal to the additional excess reserves multiplied by which of the following?

A)   Reciprocal of one minus the required reserve ratio.

B)   Reciprocal of the required reserve ratio.

C)   Reciprocal of the potential deposit expansion multiplier.

D)   Actual deposit expansion multiplier.

The correct answer was B)

The potential deposit expansion multiplier = 1/(required reserve ratio)

The potential increase in the money supply = potential deposit expansion multiplier × increase in excess reserves

2.On January 3, Logan Industries deposited $1,000,000 in cash at Federal Savings Bank. No excess reserves were present at the time Logan made the deposit and the required reserve ratio is 10%. What is the maximum amount by which Federal Savings Bank can increase its lending?

A)   $100,000.

B)   $1,000,000.

C)   $10,000,000.

D)   $900,000.

The correct answer was D)

Since there are no excess reserves present at the time that Logan deposited the money, Federal Reserve Bank would be required to maintain $100,000 ($1,000,000 x 0.10) on reserve and would be able to loan out or increase the money supply by $900,000.

3.At a recent conference, Joe DiSanto and Michael Depasquale were discussing a recent Federal Reserve policy shift that led to an increase in banks’ excess reserves. They each offered an explanation as to why this would cause an increase in bank loans and investments:

DiSanto: “Banks are required by law to expand the number of loans they originate when the Fed creates excess reserves.”

Depasquale: “It is risky to hold excess reserves, whereas loans and investments are less risky.”

Are DiSanto and Depasquale’s statements correct?

A)                      Incorrect                         Incorrect

B)                       Correct                          Incorrect

C)                      Incorrect                          Correct

D)                       Correct                           Correct

The correct answer was A)

Both statements are incorrect. Banks are not required to expand their loans. If Fed policy increases banks’ excess reserves, the banks will want to expand their loans and investments because they generate more interest income than excess reserves deposited with the Fed. Loans and investments carry higher risk than assets held as reserves, but earn a greater return.