What is the initial step in the process of money creation?

Banking Concepts and Money Creation

Interactive Video
•
Mathematics, Business, Social Studies
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10th - 12th Grade
•
Hard

Mia Campbell
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10 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Banks issuing new currency
Banks taking deposits from customers
Individuals saving money at home
Government printing more money
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the term for the system where banks hold a fraction of deposits and loan out the rest?
Fractional Reserve Banking
Central Banking
Full Reserve Banking
Investment Banking
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the required reserve ratio?
The amount of money banks can invest in stocks
The interest rate on loans
The total amount of money banks can loan out
The percentage of deposits banks must hold in reserve
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What assumption is made about banks holding excess reserves in the simplified calculation?
Banks hold no excess reserves
Banks hold all excess reserves
Banks hold 50% of excess reserves
Banks hold 25% of excess reserves
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What happens to the loan amount in the second assumption for simplifying calculations?
It is invested in stocks
It is kept in cash
It is redeposited into the borrower's account
It is spent immediately
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How is the money multiplier calculated?
By dividing the total deposits by the required reserve ratio
By adding the required reserves to the excess reserves
By multiplying the total loans by the interest rate
By taking the reciprocal of the required reserve ratio
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If the required reserve ratio is 10%, what is the money multiplier?
20
1
5
10
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