QUESTION 15 Oeposit insurance OA can increase the possibility of bank rure B.ess

Question

QUESTION 15 Oeposit insurance OA can increase the possibility of bank rure B.essentialy soms ee srte functon as a toctonal moorve system OC leads depositors to be ess inclined to monitor bank operations O D cfn mkes berks more wcoourtable for their actions and los iely to engage in rishy behavior QUESTION 16 Halding everyhing ehe constant, if the required resarve satio fuls OA$1 acan load to sle change in the money supply than betone the charge in the rmquired reserve ratio. Of.the morey mutpler den OD. fhe amoant of excess meserves fals ais. QUESTION 17 C A inorease by only $250 million o.havethe pole hidtoincrease by $2.500 mlin. QUESTION 18 Remaining Time: 11 minubes, 27 seconds. 8 B.

Explanation / Answer

15. leads depositors to be less inclined to monitor bank operations.

Explanation: Deposit insurance is a measure implemented in many countries to protect bank depositorsfrom losses caused by a bank's inability to pay its debts when due.

16. The money multiplier increases.

Explanation: multiplier = 1 / RR. since money multiplier is the reciprocal of RR, it means whem RR falls, multiplier will increase.

17. Have the potential to increase by $2500 million.

Explanation: Open market purchase means money supply will increase. Here multiplier = 1 / RR = 1/0.1 = 10. Therefore, $250 million buy means money supply will increase by $2500 million (10 * $250 million)

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