#1
What is fractional reserve banking?
A banking system where reserves are equal to total deposits
A banking system where banks hold a fraction of their deposits in reserve
A banking system without any reserve requirements
A banking system where reserves exceed total deposits
#2
What is the term for the minimum amount of reserves that a bank must hold?
Excess reserves
Required reserves
Base reserves
Mandatory reserves
#3
In a fractional reserve banking system, what is the primary function of the central bank?
To issue currency
To regulate interest rates
To control the money supply
To provide loans to individuals
#4
What is the reserve ratio in fractional reserve banking?
The ratio of loans to total deposits
The ratio of reserves to total deposits
The ratio of currency to checkable deposits
The ratio of interest to principal
#5
How does fractional reserve banking contribute to the money supply?
By reducing the money supply
By increasing the money supply
By keeping the money supply constant
By eliminating the money supply
#6
What is the term for the process by which banks create money through lending beyond their reserves?
Fractional multiplication
Credit expansion
Reserve amplification
Bank reserve inflation
#7
What happens to the money supply if the reserve ratio is increased?
Money supply decreases
Money supply increases
No change in money supply
Money supply becomes unpredictable
#8
What is the term for the interest rate at which commercial banks can borrow reserves from the central bank?
Federal funds rate
Discount rate
Prime rate
Libor rate
#9
What is the term for the ratio of a bank's reserves to its total deposits?
Loan-to-deposit ratio
Reserve-to-deposit ratio
Capital-to-asset ratio
Liquidity ratio
#10
What is the term for the maximum amount of money that can be created through the money multiplier?
Currency ceiling
Deposit cap
Money supply limit
Monetary base
#11
How does the central bank influence the money supply in a fractional reserve banking system?
By controlling the reserve ratio
By printing more currency
By directly controlling interest rates
By eliminating reserve requirements
#12
In fractional reserve banking, what is the relationship between the reserve ratio and the money multiplier?
They are inversely related
They are not related
They are directly proportional
They have a quadratic relationship
#13
How does a decrease in the discount rate affect the money supply?
Increases the money supply
Decreases the money supply
No effect on the money supply
Makes the money supply unpredictable
#14
In the context of fractional reserve banking, what does the term 'money multiplier' refer to?
The factor by which the money supply increases due to an initial deposit
The ratio of currency to checkable deposits
The maximum amount of currency a bank can create
The ratio of reserves to total deposits
#15
What is the primary tool used by central banks to implement monetary policy in a fractional reserve banking system?
Open market operations
Currency exchange
Taxation
Fiscal policy