Author Question: Refer to the scenario above. Charles will receive a payoff of ________ if Beth trusts him and he ... (Read 72 times)

jake · **on:** Jun 29, 2018

Refer to the scenario above. Charles will receive a payoff of ________ if Beth trusts him and he defects.

A) 50
B) 0
C) 20
D) 10

Question 2

A bank has checking deposits of 400, saving deposits of 900, time deposits of 900, loans of 950, government securities of 900, outstanding credit card balances of 400, currency in its vault of 40, and deposits in its reserve account at the Fed

of 40. a. What is the amount of this bank's deposits that are in M1? b. What is the amount of this bank's deposits that are in M2? c. What is the amount of this bank's reserves?

KKcool · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

A

Answer to Question 2

a. The only deposit that is in M1 is the checking deposits, so the amount of this bank's deposits that are in M1 is 400.
b. Deposits in M2 include checking deposits, saving deposits, and time deposits. Therefore the amount of this bank's deposits that are in M2 equals 400 + 900 + 900 = 2,200.
c. Reserves are the sum of the currency in the bank's vault plus its deposits in its reserve account at the Fed. Therefore the bank's reserves are 40 + 40 = 80.