It's easy and I answered them myself too so at least you get an idea if what I'm looking for.
The effect should be answered in the form of: increase, decrease, or no effect on the money supply.
a) an increase in the quantity of US currency held overseas
I said this increases the M1 money supply and increases the M2 money supply.
b) a shift of funds from interest-earning checking deposits to money market mutual funds
I said this decreases the M1 money supply but has no effect on the M2 money supply.
c) a reduction in the holdings of currency by the general public because debit cards have become more popular and widely accepted.
I said this decreases both the M1 and M2 money supply.
d) the shift of funds from money market mutual funds into stock and bond mutual funds because the fees to invest in the latter have declined.
I said this has no effect on the M1 money supply but decreases the M2 money supply.
Am I correct for these?
Suppose the reserve requirement is 10% and the balance sheet of the People's National Bank looks like the following:
Vault cash: 20,000
Deposits at Fed: 30,000
Checking Deposits: 200,000
Net Worth: 15,000
a) What are the required reserves of PNB? Does the bank have any excess reserves?
I answered that there are 20,000 in required reserves and 120,000 in excess reserves.
b) What is the maximum loan that the bank could extend?
I answered 180,000.
c) Indicate how the bank's balance sheet would be altered if it extended this loan, specifically the ASSETS in the above was extended as a loan.
I answered that loans would increase to 300,000.
d) Suppose that the required reserves were 20%. If this were the case, would the bank be in a position to extend any additional loans? Explain.
I answered that yes, the bank would be able to extend 160,000 since 80% of 200,000 is 160,000 and 40,000 would be kept as required reserves.
I'm not sure if I answered these correctly.