Suppose the required reserve ratio is 5 percent, and currency and reserves total

Question

Suppose the required reserve ratio is 5 percent, and currency and reserves total $12 million. The maximum money supply that can be supported is

Question 5 options:

A) $12.6 million.

B) $60 million.

C) $115 million.

D) $240 million.

Which of the following is a liability on the Fed's balance sheet?

Question 6 options:

A) U.S. government securities.

B) Loans to banks.

C) Federal Reserve notes.

D) The discount window.

What interest rate does a bank pay when it borrows reserves from the Fed?

Question 7 options:

A) The prime rate.

B) The federal funds rate.

C) The required reserve rate.

D) The discount rate.

Explanation / Answer

5.

The maximum money supply that can be supported is=(1/5%)*12=240 million

6.

C) Federal Reserve notes

because these are issued by the Central bank and promises to pay the bearer the value.

7

D) The discount rate.

the above are the answers

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