The Federal Reserve Board has a significant influence over the level of economic activity, inflation, and interest rates in the United States. (a) True (b) False.

Transaction One: Open a Bank and Accept Deposits Name your Bank Draw a T-Account Representing Deposits of $2 million       Transaction Two: Grant a Loan The Reserve Requirement is 20% Customer A wants to borrow $1 million. Customer B wants to borrow $400,000. Customer C wants to borrow $300,000. Can you fulfill all three loan requests? Draw a T-Account Representing a bank that is fully “loaned up” (reduce the loan amount to Customer C if necessary)         Transaction Three: Follow the Money Creation Process Customer A deposits his loan with his home bank, Bank of Taylor Draw a T-Account Representing this transaction for Bank of Taylor assuming they already have $1.5 million in deposits and loans in the amount of $700,000         Transaction Four: Calculate the Money Creation Effect What is the money multiplier rate in this example? If banks in this economy are always fully loaned up, calculate how much money was created in this economy from the original three loans made by your bank…

9. The causes of the European banking and sovereign debt crisis included     (a) The creation of the "euro" monetary union was not accompanied by a banking union and banks started operating as regional banks while their safety was guaranteed by national governments.     (b) The European Central Bank was not given adequate powers to act as a real central bank.     (c) The rules constraining fiscal policy budget deficits became ineffective after the governments of the two largest economies in the euro zone violated the rules.     (d) All the above.     (e) Only (a) and (b) are true.

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