Author Question: A bank's assets consist of 1,000,000 in total reserves, 2,100,000 in loans, and a building worth ... (Read 26 times)

DelorasTo · **on:** Jun 30, 2018

A bank's assets consist of 1,000,000 in total reserves, 2,100,000 in loans, and a building worth 1,200,000 . Its liabilities and capital consist of 3,000,000 in demand deposits and 1,300,000 in capital. If the bank is required to keep reserves equal to one-third of deposits, what is the level of the bank's excess reserves? How much money could the excess reserves be used to create in the banking system as a result?
a. zero; zero
b. 300,000; 300,000
c. 300,000; 900,000
d. 700,000; 2,100,000

Question 2

When aggregate demand declines unexpectedly and wage contracts are fixed, then the average price level will:
a. increase and business firms will hire new workers.
b. decline and firms will reduce wages.
c. decline and business firms will lay off workers.
d. increase and business firms will lay off workers.
e. increase and business firms will increase wages.