Question

Refer to the following table to answer the following questions:
Checkable deposits $400,000,000
Currency $340,000,000
Traveler's checks $4,000,000
Money market mutual funds $50,000,000
Small time deposits $6,000,000
Savings deposits $850,000,000
What is the value of M1?
a. $404,000,000
b. $740,000,000
c. $906,000,000
d. $744,000,000
e. $1,650,000,000
What is the value of M2 that is not part of M1?
a. $404,000,000
b, $740,000,000
c. $906,000,000
d. $744,000,000
e. $1,650,000,000
If Harold were to deposit cash into his savings account, which of the following changes would take place?
a. M1 would remain the same.
b. M2 would remain the same.
c. M2 would decrease.
d. M1 would increase.
e. M2 would increase
The local bank has decided to double the number of its local branch offices. How will this affect the bank's balance sheet?
a. Total assets will increase.
b. Total liabilities will increase.
c. Total liabilities will decrease.
d. Total assets will decrease.
e. Total assets and total liabilities will both remain unchanged.
Loans and deposits within a bank are:______
a. liabilities and assets, respectively, on a bank's balance sheet.
b. assets and liabilities, respectively, on a bank's balance sheet.
c. are not found on a bank's balance sheet
d. both assets.
e. both liabilities

Answer 1

Answer:

Following are the answer to this question:

In question first, the answer is "Option d".

In question second, the answer is "Option e".

In question third, the answer is "Option e".

In question fourth, the answer is "Option e ".

In question fifth, the answer is "Option b".

Explanation:

Given values:

$Checkable \ deposits = \ 400,000,000\\Currency = \ 340,000,000\\Traveler's \ checks = \ 4,000,000\\Money \ market \ mutual \ funds = \ 50,000,000\\Small \ time \ deposits = \ 6,000,000\\Savings \ deposits = \ 850,000,000$

Solution:

• $\text{M1= currency +checkable deposits + travellers check}$

    = $400000000+$340000000+$4000000

    = $744000000

$\bold{\text{M2 = M1 +money market mutual funds + small time deposit+ saving deposit}}$

      =  $744000000 + $50000000+$6000000+$850000000

       = $1,650,000,000

• Saving account deposits, which means its amount of money increased throughout the M2 portion regular savings account. So M2 will grow  
• Its increase in the number of employees may not impact the balance sheet with banks, because each bank maintains its entire cash flow
• For banks, loans are investments if they're lending money as a bank to people. So, it's on income statement asset side