19. Based on the balance sheets for three different banks, which of the following is true, if the reserve requirement is 10 percent? BANK A Assets Liabilities Actual reserves Loans $1,000 $4,000 Demand deposits $5,000 BANK B Assets Liabilities Actual reserves Loans $ 100 Demand deposits $ 600 $ 500 BANK C Assets Liabilities Actual reserves $ 10 Demand deposits $ 90 $ 100 Loans Bank B can increase its loans by $500. Bank B can increase its loans by $40. Bank A has no excess reserves. O Bank B has no exces

19. Based on the balance sheets for three different banks, which of the following is true, if the reserve requirement is 10 percent? BANK A Assets Liabilities Actual reserves Loans $1,000 $4,000 Demand deposits $5,000 BANK B Assets Liabilities Actual reserves Loans $ 100 Demand deposits $ 600 $ 500 BANK C Assets Liabilities Actual reserves $ 10 Demand deposits $ 90 $ 100 Loans Bank B can increase its loans by $500. Bank B can increase its loans by $40. Bank A has no excess reserves. O Bank B has no exces

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The table shows the commercial banks' balance sheet (aggregated over all the banks). The commercial banks' desired reserve ratio on all deposits is 10 percent and there is no currency drain. Calculate the bank's excess reserves. >>> Answer to 2 decimal places. Assets Reserves at the Fed Cash in vault Securities Loans The banks' excess reserves are $☐ million. Liabilities (millions of dollars) 2535 20 Checkable deposits 15 Savings deposits 40 95
Homework: Chapter 13 Suppose the economy's entire money supply equals checkable deposits in the amount of $900,000 held in First Main Street Bank. The required reserve ratio is 10% with no excess reserves and no cash leakage. Reserves Loans First Main Street Bank's balance sheet Assets Reserves Loans $810,000 $90,000 Checkable Deposits $900,000 Suppose the Fed sells $3,000 worth of government securities to First Main Street Bank. Complete the following table to reflect the Fed's sale on the balance sheet for First Main Street Bank. Liabilities Assets STEP: 1 of 3 Checkable Deposits O The bank has zero excess reserves. Liabilities Based on its balance sheet, how can you characterise First Main Street Bank? O The bank has $3,000 in excess reserves. O The bank has $81,000 in excess reserves. The bank is reserve deficient.
12
Suppose that Kesha deposits $8,000 into her savings account at First Bank. The reserve requirement facing First Bank Is 20%. Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. Use this information to show how First Bank's assets and liabilities Initially change when Kesha deposits the $8,000 in the bank. A Simple Bank Balance Sheet Assets Change in Reserves: $ Liabilities Change in Deposits: $ b. How much money can First Bank lend out to other people? $ c. Now suppose that First Bank holds no excess reserves and lends out all of the excess reserves resulting from Kesha's deposit. How do First Bank's assets and liabilities change? A Simple Bank Balance Sheet Assets Change in Reserves: $ Change in Loans: $ Liabilities
M1
2. Suppose the required reserve ratio is 11%, currency in circulation is $285 billion, the amount of checkable deposits is $600 billion, and excess reserves are $192 billion. Suppose the central bank is fighting rising inflation. The FOMC wants the money supply to fall by $80 billion. Assuming the ratios you calculated in question 1 are the same, calculate the size of the open market sale that would be needed to cause a change in the money supply of $80 billion.
4
The table given below shows the assets and liabilities of the Tenth National Bank, Assume that this is the only bank in the economy. Table 16 Balance Sheet of Tenth National Bank Assets Liabilities Reserves $2,730 Deposits $7,640 Loans $3,300 Total Assets $7,640 Total Liabilities $7,640 Refer to Table 16. If this Bank's depositors withdraw $935, and the Federal Reserves decreases the reserve requirement from 12% to 9%. This bank's excess reserves will change by: O $313.35 O $371.05 O -$554.60 O -$621.65 -$563.95
Assume that banks lend out all their excess reserves and individuals deposit all their money. If the Required Reserve Ratio is .20, what does the Fed have to do to decrease the supply of money by $300 billion? Select one: a. Sell $60 billion worth of government bonds to commercial banks b. Sell $80 billion worth of government bonds to commercial banks c. Sell $200 billion worth of government bonds to commercial banks d. Buy $100 billion worth of government bonds from commercial banks e. Buy $60 billion worth of government bonds from commercial banks
A bank has $20 in cash in its vaults, $280 deposited at the central bank, has made $1700 in loans to its customers and has $2000 in deposits from customers. What is this bank's actual reserve ratio? (Round to two decimal places and do not enter the percent. If your answer is 0.114 (11.4%), enter 0.11. If your answer is 0.115 (11.5%), enter 0.12. If appropriate, remember to enter the - sign.)
How does deposit insurance encourage banks to take on too much risk? 1. Banks can make riskier investments because the government has insured banks against losses on their investments 2. Banks can make riskier investments without worrying about deposit withdrawals because the government has insured depositors against losses 3. Deposit insurance encourages banks to increase investments in riskless assets 4. With deposit insurance, depositors have more incentive to withdraw their deposits if the managers make reckless investments
Total reserves $55 billion Transactions deposits: $600 billion Cash held by public: $400 billion Bonds held by public: $400 billion Stocks held by public: $140 billion Gross domestic product: $8 trillion Interest rate: 6 percent Required reserve ratio: 0.10 How large is the money supply (M1)? How much excess reserves are there? What is the money multiplier? What is the available lending capacity?