The simple deposit multiplier is the ratio of the amount of
A) new reserves created by the banks to the amount of deposits.
B) new reserves created by the banks to the amount of loans.
C) deposits created by the banks to the amount of new reserves.
D) loans issued by the banks to deposits created by the banks.
Answer: C
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The "underground economy" is also referred to as
A) the informal sector. B) the halfway economy. C) the net domestic product economy. D) the formal sector.
Suppose Trust Bank has $500 million in assets and $400 million in liabilities. The Fed purchases $45 million in bonds from the bank. Which of the following is a likely consequence of the Fed's action?
a. An increase in the bond holdings of Trust Bank by $45 million and a decrease in the bank's reserves by $45 million b. A decrease in both the bond holdings and reserves of Trust Bank by $45 million c. An increase in both the bond holdings and reserves of Trust Bank by $45 million d. A decrease in the bond holdings of Trust Bank by $45 million and an increase in the bank's reserves by $45 million