Question

If total federal spending for 2010 equals $3,400 billion, and total federal tax revenues equal $3,800 billion,

a. The budget surplus will equal $400 billion

b. The budget deficit will equal $400 billion

c. The national debt will equal $500 billion

d. The budget deficit will equal $5.2 trillion

Which of the following is not considered a form of money?

a. Cash

b. Checking account balances

c. Credit cards

d. Traveler’s checks

Suppose a bank that is subject to a 20 percent required reserve ratio receives a new deposit of $1,000. Of this, the bank would be able to extend new loans up to a maximum of ______.

a. $800

b. $200

c. $700

d. $850

Suppose a bank that is subject to a 10 percent required reserve ratio receives a new deposit of $5,000. The bank’s required reserves would increase by ______.

a. $50

b. $100

c. $500

d. $4,500

Answer 1

Answer.)

Q1.) a. The budget surplus will equal $400 billion

Budget Balance = tax revenues - total federal spending = $400

Positive budget balance means its a budget surplus.

Q2.) b. Checking account balances

Q3.) a. $800

Note that required reserve ratio is 20% , it simply means that bank cannot lend more tha 80% of new deposits. Thus, bank would be able to extend new loans up to a maximum of $800.

Q3.) c. $500

bank’s required reserves would increase by = $5000 x (10/100) = $500.