QUESTION 16 b any claim against what the bank owns o c anyth

QUESTION 16 b, any claim against what the bank owns. o c anything that the bank owns O d what the bank owes to others QUESTION 17 Bll deposits in his bank $5,000 in cash that he has been hiding unde then the total increase in the quantity of money created by the banking system is a $10,000 G, b S20.000 er his mattress. If all banks make as many loans as possible and the required reserve ratio is 10 percent $45,000 d $5,000

Solution

Question 16

With respect to bank, an asset is something that a bank has ownership right on to or has claim on.

So, it can be stated that an asset is anything that the bank owns.

Hence, the correct answer is the option (c).

Question 17

New deposit created at the bank = $5,000

Required reserve ratio = 10% or 0.10

Required reserves = $5,000 * 0.10 = $500

Excess reserves created = $5,000 - $500 =$4,500

Money multiplier = 1/Required reserve ratio = 1/0.10 = 10

Calculate the total increase in the quantity of money created -

Total increase = Excess reserves created * Money multiplier = $4,500 * 10 = $45,000

The total increase in the quantity of money created by the banking system is $45,000.

Hence, the correct answer is the option (c).