The reserve ratio is 20 percent. After the Fed buys $1 million in U.S. government securities from a bond dealer by transmitting the funds to the dealer?s deposit account at Bank A, Bank A lends a construction company an amount equal to its excess reserves. The construction company spends the entire amount on lumber from a lumber yard, which deposits the construction company?s check in its deposit account with Bank A. The maximum loan Bank A can now make is
A) $0.
B) $640,000.
C) $800,000.
D) $1 million.
Answer: B) $640,000.
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A unit of account
A) is a type of accounting of how many currency units there are in an economy. B) is an accounting of the total units of goods and services produced in an economy. C) is an agreed measure for stating the prices of goods and services in an economy. D) is a type of value stored within all assets.
If the monopoly illustrated in the figure above could engage in perfect price discrimination, then each buyer would pay
A) $2.00. B) $3.00. C) $3.50. D) a different price.
Offering product-specific services shifts the market demand for the product to the ________ and the market supply to the ________.
A) left; right B) left; left C) right; right D) right; left
If a good is normal and its price increases,
a. the income effect will be positive and the substitution effect will be positive. b. the income effect will be negative and the substitution effect will be negative. c. the income effect will be positive and the substitution effect will be negative. d. the income effect will be negative and the substitution effect will be positive.