The following figures are for the banking system. Deposits at the central bank = 400 U.S. Government Securities = 600 Transactions Deposits = 1,700 Loans = 800 Stockholder's Equity = 70 Other Assets = 450 Other Liabilities = 380 Borrowing from the Federal Reserve = 250 Cash in the Vault = 150 The reserve ratio on transactions deposits = 10 Currency in circulation = 10 The monetary base equals:
a. A multiple of 80
b. A multiple of 250
c. 560
d. Cannot be determined with this information.
e. 1,700
Question 2
Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real GDP and current international transactions in the context of the Three-Sector-Model?
a. Real GDP rises, and current international transactions become more negative (or less positive).
b. Real GDP and current international transactions remain the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. Real GDP falls, and current international transactions become more negative (or less positive).
e. Real GDP rises, and current international transactions remain the same.
