Suppose a bank has 3 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. 70 million
b. 300 million
c. 40 million
d. 10 million
e. 30 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 the GDP Price Index and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. There is not enough information to determine what happens to these two macroeconomic variables.
b. The GDP Price Index rises, and nominal value of the domestic currency falls.
c. The GDP Price Index rises, and nominal value of the domestic currency rises.
d. The GDP Price Index falls, and nominal value of the domestic currency rises.
e. The GDP Price Index rises, and nominal value of the domestic currency remains the same.
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