There is $5,000,000 of currency in Econland, all held by banks as reserves. The public does not hold any currency. If the banks' desired reserve/deposit ratio is 0.25, then the money supply equals:
A) $5,000,000
B) $6,250,000
C) $10,000,000
D) $20,000,000
Correct Answer:
Verified
Q21: Commercial banks create new money:
A)when they increase
Q22: Liabilities of the commercial banking system include:
A)reserves
Q23: The M2 measure of money consists of
Q24: When the actual reserve-deposit ratio exceeds the
Q25: In a fractional-reserve banking system the reserve/deposit
Q27: Savings deposits are _ the M1 measure
Q28: The reserve-deposit ratio equals:
A)10 percent of bank
Q29: When a bank makes a loan by
Q30: Bank reserves are:
A)currency and customer checking deposits.
B)currency,
Q31: Banks hold reserves:
A)to earn interest.
B)to increase profits.
C)only
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