Practice The Process Of Credit Creation (4.1) - Chapter 3: Money and Banking

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9 questions

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3 cards from this section. Quick, good the night before a test.
Exercise
6 questions · about 4 min · pass mark 70%. Hints available.
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Quiz
3 questions · about 2 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What is the reserve requirement?
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Think about how banks manage deposits and withdrawals.
Question 2.
What happens to the excess reserves in a bank?
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Consider the bank's role in the economy.
3Question 3.
What percentage must banks keep as reserves?
- 50%
- 15%
- It varies
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Think about the flexibility of different banking systems.
4Question 4.
True or False: A bank can lend out all of its deposits without retaining any reserves.
- True
- False
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Reflect on the regulating rules governing banks.
Question 5.
Suppose a bank has a reserve requirement of 20%. A customer deposits $1,000. How much can the bank lend out, and what will happen to the money after lending?
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Calculate the reserve first and consider the cycle of spending.
Question 6.
Discuss the potential long-term effects on the economy if all banks lowered their reserve requirement to 5%.
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Consider both positive (growth) and negative (inflation risk) outcomes.

5 more questions in this section. Enroll free to practise them all.