imagine that Mr Smlth takes But 1oan for 000 to start a new businesS. The bank credits the £ T0,000 to Mr Smith's current account. Choose AT LEAST ONE correct answer. O a. Since Mr Smith has been credited with the £10,000 in his current account, yet he now owes the bank £10,000, the total amount of money in the economy has remained the same. O b. The extra £10,000 in Mr Smith's current account is an asset for the bank, because this is money that he owes to them. С. The loan is an asset for the bank. O d. At the point that the loan is made, the bank's net worth decreases and Mr Smith's net worth increases by the same amount, £10,000.

imagine that Mr Smlth takes But 1oan for 000 to start a new businesS. The bank credits the £ T0,000 to Mr Smith's current account. Choose AT LEAST ONE correct answer. O a. Since Mr Smith has been credited with the £10,000 in his current account, yet he now owes the bank £10,000, the total amount of money in the economy has remained the same. O b. The extra £10,000 in Mr Smith's current account is an asset for the bank, because this is money that he owes to them. С. The loan is an asset for the bank. O d. At the point that the loan is made, the bank's net worth decreases and Mr Smith's net worth increases by the same amount, £10,000.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate the (economy-wide) currency ratio, carefully following all numeric instructions. Do not convert the ratio into percent. In other words, if you get k of 0.99, enter only 0.99 in the blank.
K nunn Suppose Shanna withdraws $7,500 from her money-market mutual fund and deposits this money into her son's chequing account at a chartered bank. Then OA both M2 and M2+ will decrease by $7,500. OB. the values of M2 and M2+ will remain unchanged. OC. both M2 and M2+ will increase by $7,500. OD. M2 will decrease by $7,500, but M2+ will increase by $7,500. OE M2 will increase by $7,500, and the value of M2+ will stay the same.
Which quotation is irrelevant to the claim in paragraph 1 that "people have confidence that the money will hold its value because their government backs it"? "The Mint was charged with producing the nation's specie in copper, silver, and gold. O For the first 50 years or so, U.S. currency consisted almost entirely of coins." (paragraph 13) "Demand notes could be redeemed for silver or gold coins on demand and were legal tender guaranteed by the federal government." (paragraph 14) O "Most nations today back their own currencies as legal tender." (paragraph 15) O "Paper notes often consist of higher values than coins." (paragraph 15)
Which set of actions could the central bank use to increase the money supply? Select one: O a. an open market purchase and a tax cut O b. a discount rate cut and an open market sale O c.a reduction in the required reserve ratio and an open market purchase O d. a reduction in the required reserve ratio and an open market sale
Suppose you pay your tuition fees from your currency holdings and the university deposits the money in its chequing account at the Bank of Montreal. By taking the money creation process into account, what will be the impact on the banking system? O a. Both M2 and M2+ will decrease b. M2 will decrease, and M2+ will rise c. M2 will increase, and M2+ will fall d. Both M2 and M2+ will increase e. Both M2 and M2+ will not change cross out cross out cross out cross out cross out
Pls select the correct option and exlplain it.
Suppose the required reserve ratio is 10% and a bank receives a $10 million deposit into a checking account. By how much will deposits change in the banking system? (assume that the banking system currently has no excess reserves) Select one: $100 million. O $90 million. $10 million. O $110 million. Clear my choice
Which of the following is NOT a function of money? O a. A unit of account O b. A store of value O c. An interest-earning asset O d. A medium of exchange
21
What is the role of a commercial bank? O a. To create money through the banking system O b. To maximize profits for its shareholders O c. To take customers' deposits and make loans O d. All of the answers are correct
Banks create money by O a. buying U.S. government securities with cash. O b. printing money up to their required reserve limit. O c. creating deposits without limit. O d. making loans and creating deposits, a process that is limited by the size of banks' excess reserves. O e. printing dollar bills without limit.
Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: O the money supply by the whole banking system can increase by $1,000. O the money supply by the whole banking system can increase by $4,000. the money supply by the whole banking system can increase by $8,000. O the money supply by the whole banking system can increase by $5,000.