Author Question: Suppose a bank has 2 million in excess reserves and total reserves of 10 million. A required reserve ... (Read 191 times)

Yolanda · **on:** Jun 30, 2018

Suppose a bank has 2 million in excess reserves and total reserves of 10 million. A required reserve ratio of 10 is applicable to all deposits at the bank. What is the total amount of deposits at the bank?
a. 100 million
b. 8 million
c. 800 million
d. 80 million
e. 10 million

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 real GDP and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. Real GDP rises, and nominal value of the domestic currency rises.
b. Real GDP rises, and nominal value of the domestic currency falls.
c. Real GDP rises, and nominal value of the domestic currency remains the same.
d. Real GDP falls, and nominal value of the domestic currency rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.