First Safety, a commercial bank, has 6,000,000 of outstanding ...

[cmoore54]

First Safety, a commercial bank, has 6,000,000 of outstanding demand deposits and actual reserves of 1,700,000 . If the reserve ratio is 25 percent, what is the maximum amount of new loans the bank can extend?
 a. 100,000
 b. 425,000
 c. 200,000
 d. 1,500,000

Question 2

Suppose that the economy has witnessed an 8 percent increase in its money supply over the last few years and the Fed now announces a plan to increase the money supply by 4 percent per year. What will be the public response, assuming that the Fed has a reputation for always implementing its announced plans?
 a. High-wage contracts will prevail, and the economy will experience lower inflation at the cost of higher unemployment.
  b. High-wage contracts will prevail, and the economy will experience lower unemployment at the cost of higher inflation.
  c. Low-wage contracts will emerge, and the economy will experience lower inflation with no change in the unemployment rate.
  d. Low-wage contracts will emerge and the economy will experience higher unemployment with no change in the inflation rate.
  e. Low-wage contracts will emerge, and the economy will experience lower inflation at the cost of higher unemployment.

[polinasid]

Answer to Question 1

c

Answer to Question 2

c

[cmoore54]

YES! Correct, THANKS for helping me on my review

[ttt030911]

Excellent