Question
List the three functions of money. Explain what M1 consists of. Suppose Karen transfers $500 from her saving account to her basic checking account. How
- List the three functions of money.
- Explain what M1 consists of.
- Suppose Karen transfers $500 from her saving account to her basic checking account. How will this transaction affect M1 and M2?
4. Answer the following questions using the 1st National Bank's balance sheet. See below.
1st National Bank of Kennesaw
ASSETS LIABILITIES
Total Reserves | $50,000 | Total Deposits | $400,000 |
Required Reserves | ? | ||
Excess Reserves | $10,000 | ||
Loans | ? | Net Worth | ? |
Total | $700,000 | Total | $700,000 |
4-a. Given the balance sheet of 1st National Bank of Kennesaw, how much does the bank have in required reserves?
4-b. Given the balance sheet of 1st National Bank of Kennesaw, what is the required reserve ratio?
4-c. Given the balance sheet of 1st National Bank of Kennesaw, what is the amount of loans?
4-d. Given the balance sheet of 1st National Bank of Kennesaw, what is 1st National Bank's Net Worth?
5. Explain how the Fed's buying of US government securities in the open market will affect the money supply.
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