# RR+ER=TR ```Rev Q’s [MS = Currrency+DD of Public]
RR+ER=TR; TR-RR=ER; TR-ER=RR; MXER=PMC; PMC(Public)+DD=TMS; PMC(Fed)=TMS
Excess Reserves prior to new currency deposit (DD) = \$0
Britney Spears deposits in the banking system = \$40 billion
Legal Reserve Requirement [RR] = 20%
31. The \$40 billion deposit of Currency into DD
will result in MS staying at (\$8/\$40/\$160) billion.
32. The \$40 billion deposit of currency into
checking accounts will create ER of (\$20/\$32/\$40) billion.
33. The Potential Money Creation of the banking system
through loans is (\$40/\$160/\$\$200) bil. The Potential TMS
[all DD of the public] could be as much as (\$40/\$160/\$200)
34. The RR applies to checkable deposits at (banks/S&amp;Ls/
credit unions/ all depository institutions).
35. If the Duck National Bank has ER of \$6,000 &amp; DD of \$100,000
what is the size of the bank’s TR if the RR is 25%?
25,000
6,000
31,000
(\$25,000/\$75,000/\$31,000) [RR(\$____)+ER(\$___)+TR(\$____)
Rev Q’s
[MS = Currrency+DD of Public]
RR+ER=TR; TR-RR=ER; TR-ER=RR; MXER=PMC; PMC(Public)+DD=TMS; PMC(Fed)=TMS
36. A stranger deposits \$1,000 in a bank that has a RR of 10%. The
maximum possible change in the dollar value of the local bank’s loans would
900
be \$______.
PMC[M X ER] in the banking system is \$_____.
9,000 Potential TMS
10,000
could become as high as \$_______.
37. Suppose a commercial bank has DD of \$100,000 and the RR is 10%.
If the bank’s RR &amp; ER are equal, then its TR are (\$10,000/\$20,000/\$30,000).
38. Total Reserves (minus/plus) RR = ER.
39. Suppose the Thunderduck Bank has DD of \$500,000 &amp; the RR is 10%.
If the institution has ER of \$4,000 then its TR are (\$46,000/\$54,000/\$4,000).
40. If ER in a bank are \$4,000, DD are \$40,000, &amp; the RR is 10%, then
TR are (\$4,000/\$8,000).
41. The main purpose of the RR is to (have funds for emergency withdrawals/
influence the lending ability of commercial banks).
42. If I write you a check for \$1 &amp; we both have our checking accts at the
Poorman Bank, the bank’s balance sheet will (increase/decrease/be unchanged).
43. Banks (create/destroy) money when they make loans and repaying bank
loans (create/destroy) money.
44. When a bank loan is repaid the MS is (increased/decreased).
45. The Fed Funds rate is a loan by one bank (to another bank/from the Fed).
Rev. Q’s
[MS = Currrency+DD of Public]
RR+ER=TR; TR-RR=ER; TR-ER=RR; MXER=PMC; PMC(Public)+DD=TMS; PMC(Fed)=TMS
46. If the RR was lowered [say, from 50% to 10%], the size of the
monetary multiplier [MM] would (increase/decrease).
Leakages(limitations) of the Money Creating Process
1. Cash leakages [taking part of loan in cash]
2. ER (banks don’t loan it or we don’t borrow]
47. If borrowers take a portion of their loans as cash, the maximum amount by
which the banking system increases the MS by lending will (increase/decrease).
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