Help me understand this Economics question please, "
If a single bank is holding
$1,000,000 in required reserves and the reserve requirement is reduced from 25%
to 20%, the bank will be able to lend what additional amount? (Reconstructing this bank's T-account will
help you answer this question.)
a. $10,000. f. $500,000.
b. $50,000. g. $1,000,000.
c. $100,000. h. $$4,000,000.
d. $200,000. i. $5,000,000.
e. $250,000. j. Who knows?
A bank has $5000 in vault
cash, $15,000 in reserves on deposit with the Fed, $3000 in gold, $1000 in U.S.
government securities, and $1000 in other securities, and $105,000 in demand
deposit liabilities. The reserve requirement for this bank is 20%. In this situation, what will tend to happen
with this bank?
a. a loan for $15,000 will be made.
b. a loan for $5,000 can be made.
c. $1,000 in loans must be called in.
d. $5,000 in loans must be called in.
e. the money supply will shrink by $25,000.
f. the money supply will increase by $25,000.
g. the money supply will increase by $5,000.
h. the money supply will decrease by $5,000. Answer: .
the situation in the question above, what will happen to the money supply for
the banking system as a whole?
(Use the same set of answers.)
3. Assume that I move $1000
from my credit union savings account to my checking account at the same credit
union. Indicate whether the following
statements will be true or false:
a. As a result of this, the amount of currency
will decrease. T F
b. The level of M1 will rise. T F
level of M2 will rise. T F