imagine that Mr Smlth takes But 1oan for 000 to start a new businesS. The bank credits the £ T0,000 to Mr Smith's current account. Choose AT LEAST ONE correct answer. O a. Since Mr Smith has been credited with the £10,000 in his current account, yet he now owes the bank £10,000, the total amount of money in the economy has remained the same. O b. The extra £10,000 in Mr Smith's current account is an asset for the bank, because this is money that he owes to them. С. The loan is an asset for the bank. O d. At the point that the loan is made, the bank's net worth decreases and Mr Smith's net worth increases by the same amount, £10,000.
imagine that Mr Smlth takes But 1oan for 000 to start a new businesS. The bank credits the £ T0,000 to Mr Smith's current account. Choose AT LEAST ONE correct answer. O a. Since Mr Smith has been credited with the £10,000 in his current account, yet he now owes the bank £10,000, the total amount of money in the economy has remained the same. O b. The extra £10,000 in Mr Smith's current account is an asset for the bank, because this is money that he owes to them. С. The loan is an asset for the bank. O d. At the point that the loan is made, the bank's net worth decreases and Mr Smith's net worth increases by the same amount, £10,000.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
Problem 2CQQ
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Transcribed Image Text:Imagine that Mr Smith takes out a loan for £10,000 to start a new business. The bank credits the £10,000 to Mr
Smith's current account.
Choose AT LEAST ONE correct answer.
a.
Since Mr Smith has been credited with the £10,000 in his current account, yet he now owes the bank
£10,000, the total amount of money in the economy has remained the same.
b. The extra £10,000 in Mr Smith's current account is an asset for the bank, because this is money that he owes
to them.
The loan is an asset for the bank.
O d. At the point that the loan is made, the bank's net worth decreases and Mr Smith's net worth increases by
the same amount, £10,000.
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