Mod 4.4: Banking and Money Creation

Currency in bank vaults and bank deposits held by the Federal Reserve are called:

• money supply

• assets

• liabilities

• bank reserves

• endowment

When a bank's depositors withdraw funds due to widespread fears of bank failure, there is a

• bank phobia

• bank run

• bull market

• bear market

• rabbit market

Which of the following is a protection against bank runs?

• deposit insurance

• capital requirements

• reserve requirements

• the discount window

• all of the above

The smallest fraction of bank deposits a bank is required to hold

• reserve ratio

• capital requirement

• deposit insurance

• deposit assurance

• mortgage insurance

This allows a bank to borrow money from the Federal Reserve at a low interest rate.

• deposit insurance

• capital requirements

• reserve requirements

• discount window

• savings bonds

The money supply is equal to

• currency in circulation

• bank reserves + currency in circulation

• M1 + M2

• monetary base – currency in circulation

• currency in circulation + checkable bank deposits

The money multiplier =

• 1 + rr

• 1 – rr

• 1 (rr)

• 1 / rr

• 1^rr