#1
Which of the following is a function of commercial banks?
Issuing government bonds
Regulating the stock market
Providing loans and advances
Setting monetary policy
#2
When a commercial bank receives a deposit, which portion of it can be loaned out?
All of it
None of it
A fraction of it
Twice the amount
#3
Which of the following is not a function of money?
Medium of exchange
Store of value
Unit of labor
Unit of account
#4
Which of the following is an example of a demand deposit?
Certificate of deposit (CD)
Savings account
Checking account
Money market account
#5
What is the primary tool used by central banks to control the money supply?
Open market operations
Taxation
Government spending
Price controls
#6
Which of the following is true about fractional reserve banking?
Banks must hold only a fraction of their deposits as reserves
Banks must hold all of their deposits as reserves
Banks are not required to hold any reserves
Banks are required to hold more than their deposits as reserves
#7
What is the term used to describe the interest rate at which the central bank lends money to commercial banks?
Discount rate
Prime rate
LIBOR
Federal funds rate
#8
What happens to the money supply when the central bank sells government securities in open market operations?
Increases
Decreases
Remains unchanged
Becomes more volatile
#9
What is the name of the rate at which banks lend to each other overnight?
Prime rate
LIBOR
Federal funds rate
Discount rate
#10
What is the term for the minimum amount of reserves that banks are required to hold by regulation?
Excess reserves
Fractional reserves
Required reserves
Reserve ratio
#11
Which of the following is NOT a way in which commercial banks create money?
Issuing loans
Issuing bonds
Creating demand deposits
Purchasing government securities
#12
What is the process through which new money is created in the banking system called?
Monetary policy
Quantitative easing
Money multiplier effect
Fractional reserve banking
#13
When a commercial bank makes a loan, how does it affect the money supply?
Decreases the money supply
Has no effect on the money supply
Increases the money supply
Redistributes wealth among the population
#14
What is the name for the process by which central banks buy securities from banks to increase the money supply?
Quantitative tightening
Open market operations
Monetary easing
Fractional reserve banking
#15
What happens to the money supply when the reserve requirement is decreased by the central bank?
Increases
Decreases
Remains unchanged
Becomes more volatile
#16
What is the name for the process of banks creating money when they make loans in excess of their reserves?
Fractional reserve banking
Monetary policy
Quantitative easing
Money multiplier effect
#17
What happens to the money supply when the reserve requirement is increased by the central bank?
Increases
Decreases
Remains unchanged
Becomes more volatile
#18
Which of the following statements about the money multiplier effect is true?
It decreases the money supply.
It increases the money supply.
It has no effect on the money supply.
It only affects government spending.