Scenario
Use the following information to answer questions 8-10.
This is the T-account for National Bank, the only commercial bank in the country. The
reserve requirement, set by the Federal Reserve, is currently 20%. Use this information to
answer the following questions.

8.) Assume that the bank meets the reserve requirement but does not hold any
excess reserves. What is the level of loans?
a. $1,200,000
b. $1,400,000
c. $1,600,000
d. $1,800,000
9.) The Federal Reserve buys $100,000 worth of bonds in open-market operations.
Assume that all funds are deposited into accounts at National Bank.
What is the new level of deposits?
a. $1,000,000
b. $3,000,000
c. $2,100,000
d. $4,000,000
10.) What is the size of the money multiplier?
Answer: _________________

    • 11 years ago
    Economics
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