Reading Guide: Section 5 Module 25
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1. What is a bank run? *
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2. Where can bank reserves be held? Check all that apply *
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3. Refer to 25.1: Why are the assets above considered assets? *
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4. What is the difference between a bank's T-account and a Firms' T-account? *
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5. How do banks earn revenue with depositors money? *
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6. How does bank insurance help reduce bank runs like IndyMac? *
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7. What series of events led to countries "...placing a system designed to protect depositors and the economy as a whole against bank runs." *
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8. Why is deposit insurance important to individuals AND the economy? *
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9. Why do regulators of banks require that the owners of banks hold substantially more assets than the value of bank deposits? *
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10. How do reserve requirements and the Fed Discount Window help reduce the chance of bank runs? *
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11. Describe the process of creating new money from a deposit. *
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12. How is the money multiplier similar to the spending multiplier? *
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13. Why are excess reserves important to track for the economy and the banking system? *
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14. If the reserve ratio is 20% and an increase in excess reserves of $2,000 occurs, what will be the total value of checkable deposits?
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15. How is the monetary base different than the money supply? *
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16. What is the current money multiplier in the US using M1 as our measure of money?
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17. How is there an overlap between checkable deposits and bank reserves? *
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18. Questions for class *
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