QUESTION 9 Refer to pages 548-551 of the textbook (2nd edition) to answer the fo

Question

QUESTION 9 Refer to pages 548-551 of the textbook (2nd edition) to answer the following two questions. Liabilities of a commercial bank include A. notes and coins in the bank's vault B. loans to other banks C. a deposit account at the Fed D. the value of its depositors' accounts E. the bank's assets QUESTION 10 For a commercial bank, the term "reserves" refers to A. a banker's concern ("reservation") in making loans to an individual without a job. B. the profit that the bank retains at the end of the year. C. currency in the bank's vault and the bank's deposits at the Federal Reserve. D. the net interest that it earns on loans. QUESTION 11 As credit card balances increase, what will be the consequence for Ml and M2? A. M1 will decrease and M2 will increase. B. M1 will increase and M2 will decrease. C. There will be no effect on M1 or M2. D. M1 and M2 will both decrease. E. M1 and M2 will both increase.

Explanation / Answer

Q10
Answer
Option C
The reserve=vault balance+bank's deposits at federal reserve
the reserve is the some of these two and it is called actual reserve at the bank , note that do not confuse with required reserve and actual reserves, the actual reserves is the total of these two and required reserve is mandatory by Fed to keep.

Q11
Option C
The credit card is not part of money supply so it is not considered under M1, M2 or M3.

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