Holt 7525-9 S15_IT

___ 12. If the required-reserve ratio is 12%, and a bank receives a deposit of $1,000, how much
may the bank loan out?
a. $120
b. $760
c. $880
d. $1,000
___ 13. Excess reserves:
a. is the excess of reserves over required reserves
b. may be loaned out
c. earn little or no revenue for the bank
d. All of the above
___ 14. U.S. government securities:
a. are debt instruments issued by the federal government
b. pay a high rate of interest since they are high risk
c. must be held by the original buyer until maturity
d. All of the above
___ 15. U.S. government securities are an attractive investment for a bank because they:
a. pay interest
b. are highly liquid
c. are low risk
d. All of the above
___ 16. If the required-reserve ratio is 10%, the potential deposit multiplier is:
a. 10
b. 8
c. 5
d. 4
___ 17. One-shot inflation can be caused by:
a. an increase in AD
b. an increase in SRAS
c. continued increases in AD
d. Both a. and b. above
___ 18. If the price level increases at a high rate year after year:
a. this is continued inflation
b. this is caused by continued increases in AD
c. the money supply must be increasing rapidly
d. All of the above
___ 19. An increase in the rate of inflation:
a. increases the buying power of people who hold money
b. increases the real interest rate earned on savings
c. benefits lenders and hurts borrowers
d. None of the above
___ 20. If Karen earns a 6% interest rate on her savings when the inflation rate is 4%, her real
interest rate is:
a. -2%
b. 2%
c. 4%
d. 10%
FOR REVIEW ONLY - NOT FOR DISTRIBUTION
10 - 15 Money, Money Creation, and Inflation