A bank owns a 10-story office building. In the bank's balance sheet, this would be an example of:
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an asset
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A bank has $2 million in checkable deposits. In the bank's balance sheet, this would be an example of:
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a liability
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Which of the following is correct?
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The actual reserves of a commercial bank equal its excess reserves plus its required reserves.
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Other things being equal, an expansion of commercial bank lending:
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increases the money supply
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Answer the question based on the following balance sheet for the First National Bank. Assume the reserve ratio is 15% percent.
Refer to the above data. This commercial bank has excess reserves of:
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Excess reserves=Actual reserves - Required reserves.
Required reserves=Required reserve ratio * Checkable-deposit liabilities= 15%*$120,000=$18,000.
So excess reserves = $50,000-$18,000=$32,000.
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What are the components of the M1 money supply?
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1. Currency - coins or dollar bills/paper money
2. Checkable Deposits - commercial, savings institutions, or thrifts
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Why is the face value of a coin greater than its intrinsic value?
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The face value of a coin is greater than its intrinsic value because if the intrinsic value was greater people may melt the coin down and sell it for its material value. This would mean money would constantly be destroy and go out of circulation.
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What near-monies are included in the M2 money supply?
What is meant when economists say that the Federal Reserve Banks are quasi-public banks?
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It can be said that Federal Reserve Banks are quasi-public because each Federal Reserve is owned by the commercial banks within its district. However, the Board of Governers is independent and generates laws and regulations for commercial banks. This means that the commercial banks do not compete with the Federal Reserves, and Federal Reserves aren't motivated by profit because they're funded by other banks. Although they practice public institutions, they aren't in business with the public, just commercial banks and the government.
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