5-2 (5-8) Question 5. 5. Suppose the banking system currently has $300 billion i

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5-2 (5-8)

Question 5. 5. Suppose the banking system currently has $300 billion in reserves; the reserve requirement is 10 percent; and excess reserves amount to $3 billion. What is the level of deposits? (Points : 5) $3,300 billion $2,970 billion $2,700 billion $2,673 billion

Question 6. 6. Consider five individuals with different occupations. Allen prepares taxes wants ribs Betty does dry cleaning wants computer fixed Calvin fixes computers wants bread Diedre bakes bread wants taxes prepared Eric barbecues ribs wants dry cleaning In a barter system which of the following pairs has a double coincidence of wants? (Points : 5) Allen and Eric Diedre and Calvin Both A and B are correct. None of the above are correct.

Question 7. 7. Which of the following is an asset of a bank and a liability for its customers? (Points : 5) deposits of its customers and loans to it customers deposits of its customers but not loans to its customers loans of its customers but not the deposits of its customers neither the deposits of its customers nor the loans to its customers

Question 8. 8. The members of the Federal Reserve’s Board of Governors (Points : 5) are elected to office by the public every fourteen years. are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives. are elected by bankers in each Federal Reserve Region. are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Explanation / Answer

5.5) reqiured reserves=300-3=297 $ billion

reserve ratio =10%

297=0.1(deposits)

deposits=297/0.1=2970 $ billion

6.6) Double coincidence of wants means both parties agree to buy each other goods.None of the options are correct.

7.7) Loans of its customers but not the deposits of its customers is correct option.

Since loans are liability of customers to be paid to bank and hence it will be an asset to bank which customer will pay them.

8.8) The members of the Federal Reserve’s Board of Governors are appointed by the president of the U.S. and confirmed by the U.S. Senate.

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