QUESTION 14 2 points Save Answer If a banking system has $1,000 of reserves and
ID: 1114951 • Letter: Q
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QUESTION 14 2 points Save Answer If a banking system has $1,000 of reserves and the required reserve ratio is 50%. the maximum volume of checkable deposit liabilities of all depository institutions combined would be A. $500 O B.$5.000 C. 51.000 O D.52.000 QUESTION 15 2 points Save Answer Continuing with the scenario from the previous question, what would happen if the Fed reduced the reserve requirement from 50% to 10%? OA Reserves would stay the same, and Maximum Deposits would rise to $10,000 BReerves would stay the same, and Maximum Deposits would fall to $100 OCReserves would fall and Maximum Deposits would rise Reserves would fall and Deposits would fall by ten times the decrease in Reserves. QUESTION 16 2 points Save Answer Suppose the Fed purchases $5,000 in U.S. government securities from the Last National Bank Which of the following results from this transaction OA Both the Fed's assets and its liabilities fall by S5,000 TheLast National Bank's balance sheet shows a change in the composition of its assets. This transaction decreases the money supply OD Both the Last National Bank's assets and its liabilities rise by $5,000 QUESTION 17 2 points Save Answer Tony deposits $2,000 in cash at the Last National Bank and the bank credits Tony's checking account in the amount of $2,000. Which of the following is true immediately after this transaction, before Last National Bank has a chance to expand or contract its lending? O A The money supply increases by 52.000 times the money multiplier OB. Both the assets and the liabilities of the Last National Bank fall by $2,000 OC Only the composition of the money supply changes, not its amount O D. The money supply increases by $2.000Explanation / Answer
14) The maximum volume of checkable deposit liabilities of all depository institutions combined would be $ 2000.
Multiplier = 1/ (1- 50%)
= 1/ (1-1/2)
= 2
The maximum amount of checkable deposits= multiplier * ($1000 of reserves)
= $2000 answer
15) Option (c) is correct. Reserves would fall and maximum deposits would rise when the fed reduced thereserve requirement from 50% to 10%.
16) Option (c ) is correct. If the Fed puchases $5000 in US government securities from the last national bank. The transaction would decraese money supply.
17) Option (a ) is correct. When Toy deposits $2000 in cash at the last national bank and the bank credits Tony's checking account in the amount of $2000 then the money supply increases by $2000 times the money multiplier.
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