Answer the question based on the following information on the banking system. Deposits at the central bank = 200 U.S. Government Securities = 600 Checking Deposit = 1,700 Loans = 800 Stockholder's Equity = 70 Other Assets = 450 Other Liabilities = 230 Borrowing from the central bank = 100 Cash in the Vault = 50 The reserve ratio on checking accounts = 10 The monetary base:
a. cannot be determined from this information
b. equals 250
c. equals 134
d. equals 2,100
e. none of the above
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 reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. Real GDP rises, and reserve-related (central bank) transactions become more positive (or less negative).
b. Real GDP rises, and reserve-related (central bank) transactions remain the same.
c. Real GDP and reserve-related (central bank) transactions remain the same.
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. Real GDP falls, and reserve-related (central bank) transactions remain the same.
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