O

0 120 4
O

O 1000 200 5

200 1000617 100

O
1. a. Yes, medium of exchange
b. No, not a unit of exchange
c. No, not a medium of exchange
d. No, not a medium of exchange

2.
Assets Liabilities Uncle's wealthhas not
Reserves 10 Deposit100 changed Hesimply repayed
Loans 0 what hetook out
3.
Assets Liabilities
12 25mil D 250mi
L 225mi
b.
Assets Liabilities
12 24mil D 240mil
L 216mi
c. Less banks can borrow from the BSB so will not be able to cover de cits
d. Loans make them money. Encourage more deposits or make loans themselves.

4. $100. $1000.

6. $100million. Money Multiplier (10) time 10. $10million, banks can choose to hold on to all of it.

7. The money supply will increase more when the Fed buys bonds because they are creating money while the deposit has the $2000 already
in circulation. The Fed creates $40,000 and the deposit creates $38,000. Multiple the $2000 by 5 and for the deposit subtract $2000.

8. There is $100,000 more in reserves and money supply increase by $10,000,000. The bank might do so that it can pay back any loans it
took out from other banks. The money multiplier doesn’t change and the money supply increases by the same amount as before.

9. a. 10. Money supply is $1,000,000,000

b. Reserves are now $200 billion. The money supply is now $500 billion.

10. a. Buy bonds

b. $8 million worth of bonds. It will be multiplied by 5 to get $40 million.

11. a. $2000
b. $2000
c. $2000
d. $20000
e. $15000