In Macroland There Is $12,000,000 in Currency

question 48

Multiple Choice

In Macroland there is $12,000,000 in currency.The public holds half of the currency and banks hold the rest as reserves.If banks'desired reserve/deposit ratio is 12.5%, deposits in Macroland equal ______ and the money supply equals _______.

• A)$48,000,000; $75,000,000
• B)$54,000,000; $54,000,000
• C)$48,000,000; $54,000,000
• D)$96,000,000; $96,000,000

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Definitions:

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, taking into account both current interest payments and the bond's price appreciation.

Face Value

The nominal or dollar value printed on a bond or other financial security, representing the amount due at maturity.

Coupon Rate

The annual interest rate paid by a bond, expressed as a percentage of the face value.

Yield To Maturity

The overall gain expected from a bond, provided it is kept until its due date, including all received interest and the principal amount's reimbursement.