Suppose a bank has a 10 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.()
A. It has $50 in reserves and $4,950 in loans.
B. It has $500 in reserves and $4,500 in loans.
C. It has $555 in reserves and $4,445 in loans.
D. None of the above is correct.
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If the reserve ratio is 5 percent, $1,000 of additional reserves can create()
A. $25,000 of new money.
B. $20,000 of new money.
C. $19,000 of new money.
D. $15,000 of new money.
To increase the money supply, the Fed could()
A. sell government bonds.
B. decrease the discount rate.
C. increase the reserve requirement.
D. None of the above is correct.
Paper money()
A. has a high intrinsic value.
B. is the primary medium of exchange in a barter economy.
C. is valuable because it is generally accepted in trade.
D. is valuable only because of the legal tender requirement.
An item that people can use to transfer purchasing power from the present to the future is called()
A. a medium of exchange.
B. a unit of account.
C. a store of value.
D. None of the above is correct.