Which action by a private bank will cause an increase in the money supply, as measured by M1 or M2? O The bank pays a dividend to shareholders. O The bank raises the posted interest rate on loans from 4 percent to 6 percent. O The bank honors a request by a customer to withdraw $100 from the bank. O The bank takes $100 in deposits from the public. O The bank lends $100 to a firm.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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1

Which action by a private bank will cause an increase in the money supply, as measured by M1 or
M2?
The bank pays a dividend to shareholders,
The bank raises the posted interest rate on loans from 4 percent to 6 percent.
The bank honors a request by a customer to withdraw $100 from the bank.
The bank takes $100 in deposits from the public.
The bank lends $100 to a firm.
2
You have the following data:
Assets
Reserves
(vault cash)
Liabilities
40
Deposits
300
Short-term
debt
Loans
100
40
Mortgage-
backed
securities
(MBS)
Treasury Bills 100
Total
Long-term
Debt
200
50
Equity
440
The reserve requirement is 10 percent.
How much can the bank lend?
30
20
10
40
O OC
o 0000
Transcribed Image Text:Which action by a private bank will cause an increase in the money supply, as measured by M1 or M2? The bank pays a dividend to shareholders, The bank raises the posted interest rate on loans from 4 percent to 6 percent. The bank honors a request by a customer to withdraw $100 from the bank. The bank takes $100 in deposits from the public. The bank lends $100 to a firm. 2 You have the following data: Assets Reserves (vault cash) Liabilities 40 Deposits 300 Short-term debt Loans 100 40 Mortgage- backed securities (MBS) Treasury Bills 100 Total Long-term Debt 200 50 Equity 440 The reserve requirement is 10 percent. How much can the bank lend? 30 20 10 40 O OC o 0000
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