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Financing Activity Direct Indire Jim and Mary obtain a mortgage for a new house from their commercial bank Juanita deposits a portion of her pay
Financing Activity Direct Indire Jim and Mary obtain a mortgage for a new house from their commercial bank Juanita deposits a portion of her pay each month into a savings account Delta Airlines uses an investment to sell $25 billion in corporate debt Airbus North America borrows $5 million from Bank of America for working capital Boeing draws on its credit line at Citibank borrowing $20 billion American Airlines issues new stock to increase cash A technology start-up company receives funding from a venture capitalist firm An entrepreneur borrows money from family members to start a new business 3. Define M1 and M2 4. The following questions address money creation in the banking system. Assume the required reserve ratio is 10%. a. Define bank reserves in the US banking system. In the US banking system, what funds are commercial banks allowed to use as reserves? b. A large bank's liabilities include $10 billion ($10 0) in checkable deposits. What are the Required Reserves? C. The same bank has assets that include $200 million in vault cash and $800 million on deposit at the Federal Reserve Bank. What are the excess reserves, if any? d. What is the theoretical money multiplier? Show the computation
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