Question

1a) Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?

$5,400 billion

$5,100 billion

$270 billion

b) When the Fed purchases $1000 worth of government bonds from the public, the US money supply eventually increases by

less than $1000

exactly $1000

none of these are correct

more than $1000

$6,000 billion

c) If the aggregate demand curve shifts left, then in the short run

the price level rises and real GDP falls

the price and real GDP both fall

the price level and real GDP both rise

the price level falls and real GDP rises

d) If countries that imported goods from the US went into recession, we would expect that US net exports would

rise, making AD shift right

fall, making AD shift right

fall, making AD shift left

rise, making AD shift left

Answer 1

1a). Ans - $5,400 billion

T-account: a simplified accounting statement that shows a bank's assets & liabilities.

Example: FIRST NATIONAL BANK
Assets:
Reserves $ 10
Loans $ 90

Liabilities:

Deposits $100

Banks' liabilities include deposits, assets include loans & reserves. In this example, notice that R = $10/$100 = 10%.

b) Ans - more than $1000.

c) Ans - the price and real GDP both fall

d) Ans - fall, making AD shift left