Use the following to answer question 1: Scenario: Assets and Liabilities of the

Question

Use the following to answer question 1: Scenario: Assets and Liabilities of the Banking System Assets Loans Reserves S900,000 100,000 Liabilities Deposits $1,000,000 1. (Scenario: Assets and Liabilities of the Banking System) According to the scenario Assets and Liabilities of the Banking System, suppose that the reserve ratio is 10% when the Fed buys $25,000 worth of U.S. Treasury bills from the banking system. If the banking system does not want to hold any excess reserves, money supply. A) $666,667 B) $111,111 C) $250,000 D) $1 million will be added to the _ 2. This question refers to the accounting for U.S. international transactions. Suppose that a family from Peru eats in a restaurant in Salt Lake City, Utah. This transaction would appear in te , and it would be entered as a A) current account; payment from foreigners B) current account; payment to foreigners C) financial account; payment from foreigners D) financial account; payment to foreigners

Explanation / Answer

Ans1:- If the banking system does not want to hold any excess reserve …………………will be added to the money supply:- Correct Answer:-

C:- $250000

Reason:- Money added = $25,000*10 = $250000

Answer 2:- suppose that a family from Peru easts in a restaurant in Salt Lake City, Utah. This transaction would appear in the ………………..and it would be entered as a

Correct Answer:- A:- current account; payments from foreigners

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