201Exam2-Fall 2017 ord References Mailings Review View Tell me what you want to
ID: 1114148 • Letter: 2
Question
201Exam2-Fall 2017 ord References Mailings Review View Tell me what you want to do 16) When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1 because A) decreases; checkable deposits are included in M2 but are not included in M1 B) does not change; both currency and checkable deposits are included in M1 C) increases; both currency and checkable deposits are included in Mi D) changes, but the direction of the change cannot be determined; the direction of the change depends on what Bank of America does with the deposit E) changes only if Bank of America has excess reserves; if the bank does not have excess reserves, the overall effect to M1 is too small to notice 17) If you deposit $1,000 in cash in your checkable deposit at your bank, the quantity of M1 immediately A) increases by $1,000. B) decreases by $1,000 C) increases by $2,000 D) does not change in size. E) changes, but more information about the required reserve ratio is necessary to determine the amount of the change 18) If we look at the components of M2, we find that A) money market funds are the largest component B) savings deposits are the largest component C) currency is the largest component D) banks reserves are the largest component E) loans are the largest componentExplanation / Answer
Ans:
16) Option B
Does not change both currency and checkable deposits are included in M1
M1 includes cash and checking deposits.
17) Option D
Does not chane in size
M1 includes cash and checking deposits.
18) Option B
Savings Deposits are the largest components.
M2 includes all elements of M1 as well as near money. near money means savings accounts, money market securities, mutual funds and other time deposits.
19) Option A - $610 billion
M1 = $250+$350 + $10
= $610
M1 includes currency and money in checking accounts ,demand deposits. Traveler's checks are also a component of M1.
20) Option B
Required reserves
Required reserves minimum amount of reserves that must be held by a commercial bank as per requirement of central bank regulation .
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