Question 1) Describe the effects of the currency deposit in a checking account on the composition and size of the money supply.
Question 2) Calculate a bank’s required and excess reserves when you are given its balance sheet figures.
Question 3) Describe why commercial bank is needed to maintain a reserve and why it is not sufficient to cover deposits.
Question 4) Explain what happens to the money supply when a commercial bank makes a loan or buys securities.
Question 5) Explain what happens to the money supply when a loan is repaid or a bank sells its securities.
Question 6) Describe what happens to a commercial bank’s reserves and checkable deposits after it has made a loan.
Question 7) Explain how a check drawn on one commercial bank and deposited in another will affect the reserves and excess reserves in each bank after the check clears.
Question 8) Explain what would happen to the single bank’s reserves if it made loans which exceeded its excess reserves.
Question 9) Describe how it is possible for the banking system to create an amount of money that is a multiple of its excess reserves when no single bank ever creates money greater than its excess reserves.
Question 10) Calculate the size of the monetary multiplier and the money creating potential of the banking system when given with suitable data.
Question 11) Write down the two leakages which reduce the money creating potential of the banking system.