13.2 Practice Problem 1 (algo) The Bank of Canada buys a 35000 bond from a member of the public when the reserve r include cents or minus signs in your answers. a. The bond seller's bank deposit [(Click to select) by $1 by $ b. Desired reserves at the bond seller's bank (Click to select) c. Excess reserves at the bond seller's bank [(Click to select) ✔] by $ [ d. The maximum change in the money supply is a(n) [(Click to select) of $

13.2 Practice Problem 1 (algo) The Bank of Canada buys a 35000 bond from a member of the public when the reserve r include cents or minus signs in your answers. a. The bond seller's bank deposit [(Click to select) by $1 by $ b. Desired reserves at the bond seller's bank (Click to select) c. Excess reserves at the bond seller's bank [(Click to select) ✔] by $ [ d. The maximum change in the money supply is a(n) [(Click to select) of $

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.3P

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1 A banking system is described below. All $ millions. All banks keep a reserve ratio of 20%. [25] Assets Reserves 14.4 Loans 125 Liabilities Demand Deposits 80 Equity Property 59.4 Assume a new $8 million deposit is made from outside the banking system – possibly from another country. 1.1 Calculate the value of excess reserves, if any, after the new deposit is made. 1.2 Calculate the value of the money multiplier in this system. 1.3 Calculate the amount of new money the banking system can generate in new loans.
Part 2 - Practice- Use the balance sheet for Leon’s Bank below to answer the following questions. Assets Liabilitis Required reserves $1,000 Demand deposits $10,000 Excess reserves $0 Owner’s equity $10,000 Customer loans $8,000 Government securities (bonds) $7,000 Building and fixtures $4,000 1. Calculate the required reserve ratio. Explain how you got your answer. 2. Suppose that an individual deposits $5,000 of cash into her checking account. What is the immediate effect of the cash deposit on the M1 measure of the money supply? Explain. 3. What is the dollar value of the bank’s required reserves after the $5,000 deposit in question #7? Explain. 4. What is the dollar value of the bank’s excess reserves after the $5,000 deposit in question #7? Explain. 5. Calculate the maximum amount that the money supply can change as a result of the $5,000 deposit in question #7. Show your work.
3-4 please