Note: the numbers have been entered regardless of their inflows/outflows status

Question

Note: the numbers have been entered regardless of their inflows/outflows status 21. Refer to the table above. The current account balance is equal to: a. +$200 billion. b. -$200 billion. c. +$220 billion. d. -$220 billion. e. +$20 billion 22. Refer to the table above. If there is no statistical discrepaney, the capital account balance equals: a. -$220 billion. b. +$220 billion. C. +$200 billion. d. -$200 billion. e. +$20 billion. 23. Suppose transaction deposits (TD) total $1,000 billion, the reserve requirement for all transaction deposits (TDs) is 8 percent, and reserves held by banks total $81 billion. The excess reserve ratio (e) is: a. 0.001 b. 0.1 c. 0.081 d. 0.008 24. The currency ratio (k) tends to decrease in periods of a. War. b. financial panic. c. increase in illegal transactions. d. prosperity Answer questions 25-29 based on the following information: Currency leakage ratio (k) = 0.3 Required reserve ratio (r) = 10% Excess reserve ratio (e)-5% 25. The money multiplier is about: a. 1.5 b. 2.89 c. 3.37 d. None of the above 26. Ife=0, then the money multiplier is: a. 5.5 b. 4.25

Explanation / Answer

23. Excess reserve = Total reserve - Required reserve = $ 81 billion - 8% of 1000 billion

= 81 billion - 80 billion = $ 1 billion

Excess reserve ratio = 1billion / 1000 = 0.001

Answer is a) 0.001

25. Money multiplier = (1 + c)/(c + r + e)

c is the currency ratio

r is required reserve

e is the excess reserve ratio

Money multiplier = 1.3/(0.3 + 0.1 + 0.05) = 1.3/0.45 = 2.89

Answer is b) 2.89

26. Money multiplier = 1.3/(0.3 + 0.1) = 1.3/0.4 = 3.25

Answer is c) 3.25

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