Suppose Dennis deposits $750 that he found floating down to the earth from the s
ID: 1155043 • Letter: S
Question
Suppose Dennis deposits $750 that he found floating down to the earth from the sky into the financial system. Assuming a 25% reserve ratio, that all banks lend all excess reserves, and that all loans are redeposited into the banking system, how much money will be created by Dennis’s act?
1)
2)
3)
4)
$3000 will be created.
The economy of Holly Jolly calculates M1 the same way the US does. Given the information below, what is M1?
Checkable deposits $417,565
Savings deposits $952,460
Cash in the hands of the public $215,947
Money market mutual fund account deposits $952,010
Travelers’ Checks $45,530
Question 18 options:
1)
2)
3)
4)
1)
Only the central bank can create money, so this act will not affect the amount of money in the economy.2)
$750 will be created.3)
$1000 will be created.4)
$3000 will be created.
The economy of Holly Jolly calculates M1 the same way the US does. Given the information below, what is M1?
Checkable deposits $417,565
Savings deposits $952,460
Cash in the hands of the public $215,947
Money market mutual fund account deposits $952,010
Travelers’ Checks $45,530
Question 18 options:
1)
$679,0422)
$2,583,5123)
$1,585,9724)
$1,631,502Explanation / Answer
Solution:-
Question (1):- Option (4)
Here money multiplier is 1/25%=4.
So total money that will be created = 750 (4) =3000.
Question (2):- Option (1)
The money supply M1 includes cash in hand, checkable deposits and the traveler’s check.
M1=
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