Question
Suppose that Adam Ricardo deposits $1,000 of cash into the Penguins Bank. On the same day, David Smith negotiates a loan for $4,000. By how
Suppose that Adam Ricardo deposits $1,000 of cash into the Penguins Bank. On the same day, David Smith negotiates a loan for $4,000. By how much has the money supply changed?
a.It has increased by $3,000.
b.It has decreased by $3,000.
c.It has increased by $4,000.
d.It has increased by $5,000.
What is the difference between the M1 and M2 definitions of money?
a.The M1 definition includes currency in circulation; the M2 definition does not.
b.The M2 definition includes notice deposits and personal term deposits.
c.The M2 definition includes government bonds.
d.The M2 definition includes cash held by commercial banks.
e.The M2 definition includes Canada savings bonds.
Which of the following is correct?
a.Excess reserves equal demand deposits divided by the target reserve ratio.
b.Target reserves equal demand deposits divided by the target reserve ratio.
c.Total reserves minus target reserves equal excess reserves.
d.Total reserves equal target reserves minus excess reserves.
Assume the Trusty Bank's balance sheet is as follows:
Assets | Liabilities and Net Worth | ||
Reserves | $35,000 | Demand deposits | $260,000 |
Loans | 200,000 | Equity | 50,000 |
Securities | 75,000 |
Refer to the information above to answer this question. Assume the bank's target reserve ratio is 10%, Which of the following is correct?
a.It cannot make any new loans.
b.It is able to loan out an additional $9,000.
c.It is able to loan out an additional $215,000.
d.It is able to loan out an additional $15,000.
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