What are the three functions of money?
What are the three functions of money? Which function is the defining characteristic?How is the discount rate different from the federal funds rate?Consider the balance sheet for the Wahoo bank as presented below.
| Wahoo Bank Balance Sheet | |||
| Assets | Liabilities | ||
| government securities | $1,600 | Liabilities: Checking accounts | $4,000 |
| Required Reserves | $400 | Net Worth | $1,000 |
| Excess Reserves | $0 | ||
| Loans | $3,000 | ||
| Total Assets | $5,000 | Total Liabilities | $5,000 |
Using a required reserve ratio of 10% and assuming that the bank keeps no excess reserves, write the changes to the balance sheet for each of the following scenarios:
- Bennett withdraws $200 from his checking account.
- The Fed buys $1,000 in government securities from the bank.
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