If the banking system has demand deposits of $100,000, total reserves equal to $15,000, and a required reserve ratio of 10 percent, the banking system can increase the volume of loans by a maximum of
A. $50,000.
B. $5,000.
C. $85,000.
D. $100,000.
Answer: A
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A) does not change; does not change B) increases; raises C) increases; lowers D) decreases; lowers E) decreases; raises
When the First Bank of Townsville makes a loan, it
A) prints money. B) borrows the money from the Fed. C) creates a checkable deposit. D) decreases the quantity of money. E) increases its reserves.
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A citizen of Mexico who has lived in El Paso during the past three years has just sent $100 to relatives in Mexico for Christmas. This transaction is
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