30 Assume a 10 reserve in cash for credit to her d ve requir

30. Assume a 10% reserve in cash for credit to her d ve requirement. If a customer came into the Bank and deposited $1,000 emand deposit account (a) Friedman National\'s assets would increase a customer Friedman National\'s liabilities would increase edman National Bank would be able to make an additional loan of $1,000 (c) 31. Large banks that adverti that advertise the attributes of their financial products, the special services they customers and the unique features of their credit cards are engaging in (a) oligopoly provi de to vior (b) product differentiation (c) market share domination (d) all of the above prices increase, the purchasing power value of money created by banks declines, but the purchasing power value of legal tender money remains unchanged. 33. The reason we accept checkbook money as \"money\" in the US is because (a) unlike US currency, US checkbook money is backed by gold (b) the FDIC guarantees the value of US checkbook money (c) US consumers and business firms willingly exchange goods and services for US checkbook money (d) all of the above 34. If the US government offered to sell SI bills for 50 cents (only on July 4), the demand curve for $1 bills on July 4 (at the 50 cent price) would become (a) perfectly vertical (inelastic) (b) perfectly horizontal (elastic) (c) perfectly curved (unit elastic) (d) upward sloping 35. Loans and investments made by banks are not counted in the US GDP measure because these activities do not result in the production of domestic goods (i.e., domestic product).

Solution

Q30. Answer: c

There would be an increase in liability, since customer’s deposit is not an asset because there is repayment liability of the bank.

The loan amount should not be $1,000. It will be the amount after deducting the required reserve; ($1,000 × (1 – 0.10) =) $900.

Q31. Answer: d

There are only few large banks; therefore, they jointly can create oligopoly structure where their prices are almost the same; they can differentiate their products; and can dominate the whole market by offering special and unique services.

Q32. Answer: False

The legal tender money is same as country’s currency; therefore, if one declines in value the other should react in the same way.