One monopoly that modern central banks have is in:
A. making loans to banks.
B. regulating other banks.
C. issuing currency.
D. issuing U.S. Treasury securities.
Answer: C
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Refer to Figure 18-1. Of the tax revenue collected by the government, the portion borne by consumers is represented by the area
A) B + C + F + G. B) E + H. C) F + G. D) B + C.
The money supply is $6 million, currency held by the nonbank public is $2 million, and the reserve—deposit ratio is 0.1. The monetary base is equal to
A) $2 million. B) $2.4 million. C) $2.6 million. D) $4 million.
The existence of a lender of last resort creates moral hazard for bank managers because:
A. they have an incentive to take too much risk in their operations. B. they are less likely to apply for a direct loan from the central bank. C. officials are likely to undervalue the bank's portfolio of assets. D. banks seek loans from the central bank only after exploring other options.
The basic purpose of imposing legal reserve requirements on commercial banks is to:
A. Assure the liquidity of commercial banks B. Provide a device through which the credit-creating activities of banks can be controlled C. Provide a proper ratio between earning and no earning bank assets D. Provide the central banks with necessary working capital