Question

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country’s central bank known as the Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves, 75 million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold 225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. Refer to Scenario 29-2. Assuming the only other thing Tazian banks have on their balance sheets is loans, what is the value of existing loans made by Tazian banks? a. 6,900 million tazes b. 7,125 million tazes c. 7,350 million tazes d. None of the above is correct.

(Q40) Risk-averse people will choose different asset portfolios than people who are not risk averse. Over a long period of time, we would expect that a. every risk-averse person will earn a higher rate of return than every non-risk-averse person. b. every risk-averse person will earn a lower rate of return than every non-risk-averse person. c. the average risk-averse person will earn a higher rate of return than the average non-risk-averse person. d. the average risk-averse person will earn a lower rate of return than the average non-risk-averse person.

Answer 1

Question 29-2

Required reserves = 300 million tazes

Excess reserves = 75 million tazes

Demand deposits = 7,500 million tazes

Treasury bonds = 225 million tazes

Calculate the amount of loans made by Tazian banks -

Loan = Demand deposits + Treasury bonds - Required reserves - Excess reserves

Loan = 7,500 million tazes + 225 million tazes - 300 million tazes - 75 million tazes

Loan = 7,350 million tazes

The value of existing loans made by Tazian banks is 7,350 milllion tazes.

Hence, the correct answer is the option (c).