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When you deposit $50 in your account at First National Bank and a $100 cheque you have
written on this account is cashed at Chemical Bank, then ____.
A) the assets of First National rise by $50
B) the assets of Chemical Bank rise by $50
C) the reserves at First National fall by $50
D) the liabilities at Chemical Bank rise by $50
Answer: C
Diff: 2 Type: MC Page Ref: 298 - 299
Skill: Applied
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
When $1 million is deposited at a bank, the desired reserve ratio is 20 percent, and the bank
chooses not to hold any excess reserves but makes loans instead, then, in the bank's final balance
sheet, ____.
A) the assets at the bank increase by $800,000
B) the liabilities of the bank increase by $1,000,000
C) the liabilities of the bank increase by $800,000
D) reserves increase by $160,000
Answer: B
Diff: 3 Type: MC Page Ref: 299 - 300
Skill: Applied
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
When $1 million is deposited at a bank, the desired reserve ratio is 20 percent, and the bank
chooses not to make any loans but to hold excess reserves instead, then, in the bank's final
balance sheet, ____.
A) the assets at the bank increase by $1 million
B) the liabilities of the bank decrease by $1 million
C) reserves increase by $200,000
D) liabilities increase by $200,000
Answer: A
Diff: 3 Type: MC Page Ref: 299 - 300
Skill: Applied
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
With a 10 percent reserve requirement ratio, a $100 deposit into New Bank means that the
maximum amount New Bank could lend is ____.
A) $90
B) $100
C) $10
D) $110
Answer: A
Diff: 1 Type: MC Page Ref: 299 - 300
Skill: Applied
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans