EC102_-_Ch_10_Monetary_System_S11

# EC102_-_Ch_10_Monetary_System_S11 - 1 1 .Whatfunctionof 2

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f52e6c40e68b3c25d25b0d300ad10b0fb0fc4a16.doc 1 1.  Suppose Mary puts money into a piggy bank so she can spend it later.  What function of  money does this illustrate?  2.  Suppose Bank A has \$10,000 in deposits and \$8,000 in loans.  What is its reserve ratio?  3.  Explain why banks can influence the money supply if the required reserve ratio is less than  100 percent. 4.  If the reserve ratio is 20 percent, how much money can be created from \$100 of reserves?  Show your work. 5.  Draw a simple T-account for First National Bank of Me, which has \$5,000 of deposits, a  reserve ratio of 10 percent, and excess reserves of \$300. 6.  What is meant by the term " lender of last resort ?" In what circumstances might Bank of

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## This note was uploaded on 04/06/2012 for the course ECON 102 taught by Professor ? during the Spring '08 term at Waterloo.

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EC102_-_Ch_10_Monetary_System_S11 - 1 1 .Whatfunctionof 2

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