Tony deposits $2,000 in cash at the Last National Bank and the bank credits Tony's checking account in the amount of $2,000. Which of the following is true immediately after this transaction?
A) The money supply, M1, increases by $2,000.
B) Only the composition of M1 changes, not its amount.
C) A $2,000 loan from the Last National Bank is an asset to Tony.
D) Both the assets and the liabilities of the Last National Bank fall by $2,000.
E) The immediate effect of this transaction is that M1 increases by $2,000 times the money multiplier.
Correct Answer:
Verified
Q40: The federal funds rate is the interest
Q44: Banks differ from other types of businesses
Q98: Suppose the required reserve ratio is 0.1
Q102: A single bank can increase the money
Q108: By holding highly liquid assets to guard
Q110: To maximize its profit,a bank will
A)minimize actual
Q111: The liquidity of an asset indicates
A)its buying
Q112: Liquidity contributes to the bank's achievement of
Q115: Exhibit 15-1 Q136: When a check is cleared against Bank
![]()
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents