1. What would be the level of excess reserves if the required reserve ratio were 20%? a) There would be a shortfall in required reserves of $100,000 b) 0 c) $300,000 d) $900,000 e) $1,000,000 2. If the reserve required ratio is 10%, how much can this bank lend? a) $900,000 b) $1,000,000 c) $1,300,000 d) $500,000 e) $400,000 3. Assume: a required reserve ratio of 10%, this bank is the only one with excess reserves, banks do not wish to hold excess reserves and the public does not wish to increase its cash holdings. What is the maximum amount of new money the banking system can create? a) $900,000 b) $500,000 c) $400,000 d) $4,000,000 e) $5,000,000
1. What would be the level of excess reserves if the required reserve ratio were 20%? a) There would be a shortfall in required reserves of $100,000 b) 0 c) $300,000 d) $900,000 e) $1,000,000 2. If the reserve required ratio is 10%, how much can this bank lend? a) $900,000 b) $1,000,000 c) $1,300,000 d) $500,000 e) $400,000 3. Assume: a required reserve ratio of 10%, this bank is the only one with excess reserves, banks do not wish to hold excess reserves and the public does not wish to increase its cash holdings. What is the maximum amount of new money the banking system can create? a) $900,000 b) $500,000 c) $400,000 d) $4,000,000 e) $5,000,000
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
B3-4
ALL QUESTIONS GO WITH GRAPH
1. What would be the level of excess reserves if the
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a) There would be a shortfall in |
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b) 0 |
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c) $300,000 |
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d) $900,000 |
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e) $1,000,000 |
2. If the reserve required ratio is 10%, how much can this bank lend?
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a) $900,000 |
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b) $1,000,000 |
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c) $1,300,000 |
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d) $500,000 |
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e) $400,000
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3. Assume: a required reserve ratio of 10%, this bank is the only one with excess reserves, banks do not wish to hold excess reserves and the public does not wish to increase its cash holdings. What is the maximum amount of new money the banking system can create?
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a) $900,000 |
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b) $500,000 |
||
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c) $400,000 |
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d) $4,000,000 |
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e) $5,000,000 |
Transcribed Image Text:LAST CHANCE BANK OF TOMBSTONE
ASSETS
cash in the vault:
deposits at Fed
US treasury bonds:
loans:
Building:
TOTALS:
$900,000
$100,000
$300,000
BALANCE SHEET
LIABILITIES & NET WORTH
$5,000,000
demand deposits:
$3,700,000
$2,000,000 capital stock:
$7,000,000
TOTALS:
$2,000,000
$7,000,000
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Step 1: Define fractional reserve banking.
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