Final answer:
A $6,000 credit on Franklin Company's bank statement likely resulted from a deposit made by the company. Terms related to the money supply, such as M1 and M2, involve checking accounts, traveler's checks, and currency in circulation. A bank's loan can impact the money supply by creating checkable deposits, which are included in M1.
Step-by-step explanation:
The $6,000 credit on the Franklin Company's bank statement could have been caused by Franklin Company making a deposit (a). When a company makes a deposit into its bank account, the bank statement reflects a credit because the company's account balance increases. On the other hand, writing a check (b), paying bills with cash (c), and collecting cash that was not deposited (d) would not increase the bank account balance, thus would not create a credit on the bank statement.
Now, let's address the questions on money supply determinants:
- M1 includes funds that are readily accessible for transactions. For the items listed:
- Your $5,000 line of credit on your Bank of America card is neither in M1 nor M2 as it is a form of credit, not actual money.
- $50 dollars' worth of traveler's checks you have not used yet are part of M1 because traveler's checks are used as a medium of exchange.
- $1 in quarters in your pocket is included in M1 as it is physical currency.
- $1200 in your checking account is also part of M1 since it is in a checkable deposit.
- The $2000 you have in a money market account is part of M2 since M2 includes M1 and other assets like savings deposits, money market accounts, and other near monies.
In the scenario where Singleton Bank lends $9 million to Hank's Auto Supply, the loan is recorded on the bank's balance sheet as an asset. The movement of this loan changes the reserve amount at First National, affecting the money supply because loans like this, when deposited into a checking account, expand M1 through the creation of checkable deposits. Hank's Auto Supply writing checks to pay bills will decrease these deposits over time, but the overall effect of the loan is to increase M1.
For the T-account balance sheet of a bank with deposits of $400, reserves of $50, government bonds of $70, and loans of $500, we set up the balance sheet as follows:
Assets:
- Loans: $500
- Reserves: $50
- Government Bonds: $70
Liabilities
:
Net Worth
= Assets - Liabilities = ($500 + $50 + $70) - $400 = $620 - $400 =
$220