You are given the following information on the banking system
Reserve requirement rr = 0.08
Currency-deposit ratio c = 0.10
Excess reserve ratio e = 0.05
Compute the simple deposit and money multipliers.
Simple deposit multiplier 1/rr = 1/0.08 = 12.5
Money multiplier (c + 1 )/(c + rr + e) = (0.10 + 1 )/(0.10 + 0.08 + 0.05 ) = 4.78
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Which of the following is an example of a person or firm that is most likely to have been granted a public franchise?
A) medical doctor B) taxi cab driver C) the local pizza parlor D) the local telephone company E) the local Honda dealership
Depository institutions
A) make profit from the spread between the interest rate they pay on deposits and the interest rate they receive on loans. B) make a profit according to how much the Federal Reserve pays them. C) make their profit by charging the government for their services. D) make zero profit but receive compensation by the government because their services are so valuable.