24. Assume that the reserve requirement is 20 percent, but banks voluntarilykeep some excess reserves. A $1 million increase in new reserves will result in *An increase in the money supply of $5 millionAn increase in the money supply of less than $5 millionA decrease in the money supply of $5 millionA decrease in the money supply of $1 millionTOSHIBA Use the following balance sheet for the ABC National Bank in answering thenext question(s). Assume the required reserve ratio is 20 percent.AssetsLiabilities & Net WorthReserves $ 27,000 Demand deposits $110,000Loans50,000Capital stock200,000Securities 33,000Property 200,00022. This bank can safely expand its loans bva maximum of

The economies around the globe are involved in various economic, as well as financial activities.…

24. Assume that the reserve requirement is 20 percent, but banks voluntarily keep some excess reserves. A $1 million increase in new reserves will result in An increase in the money supply of $5 million OAn increase in the money supply of less than $5 million A decrease in the money supply of $5 million A decrease in the money supply of $1 million

24. Assume that the reserve requirement is 20 percent, but banks voluntarily keep some excess reserves. A $1 million increase in new reserves will result in An increase in the money supply of $5 million OAn increase in the money supply of less than $5 million A decrease in the money supply of $5 million A decrease in the money supply of $1 million

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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8. Study Questions and Problems #8 Suppose the Federal Reserve's trading desk buys $500,000 in T-bills from a securities dealer, who then deposits the Fed's check in Best National Bank. Assuming that the required reserve ratio is 5%, complete the following table by showing changes in Best National Bank's balance sheet. Best National Bank Assets (Dollars) Reserves: Addendum: Changes in Reserves Actual reserves Required reserves Excess reserves Liabilities (Dollars) Checking deposits: Total liabilities Consider the money multiplier. The maximum increase in the money supply that can result from this open market transaction is
8. The reserve requirement, open market operations, and the money supply Consider a system of banking in which the Federal Reserve uses required reserves to control the money supply (as was the case in the United States before 2008). Assume that banks do not hold excess reserves and that households do not hold currency, so the only money exists in the form of demand deposits. To further simplify, assume the banking system has total reserves of $400. Determine the money multiplier as well as the money supply for each reserve requirement listed in the following table. Reserve Requirement Simple Money Multiplier Money Supply (Percent) (Dollars) 20 10 A higher reserve requirement is associated with a money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Maintain the assumption that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%,…
4. What components of money are counted as part of M1? A) currency, M2 and checking accounts. B) currency, travelers' checks, checking accounts and M2 O c. C) C) currency, travelers' checks and checking accounts. D) currency, travelers' checks and money market accounts 10. Explain what will happen to the money multiplier process if there is an increase in the reserve requirement? A) An increase in the reserve requirement means that banks will be less likely to have your money when you demand it, but it would increase the money multiplier B) An increase in the reserve requirement means that banks will be more likely to have your money when you demand it, increasing the money multiplier C) Since a greater portion of each deposit is being lent out, the multiplier will increase. This means more loans lent and more economic growth. D) Since a smaller portion of each deposit is being lent out, the multiplier will decrease. This means fewer loans lent and less economic growth.
Saved There is a reserve requirement of 23 percent in the United States. If the Federal Reserve makes an open market purchase of $23 million, the money supply will Multiple Choice Graw Hill decrease by $100 million. increase by $529 million. decrease by $529 million. increase by $100 million. 1 ! 87 & R T Y U ( 8 9 1 0 0 D F G H J K
4) Listen If the money multiplier decreased from 20 to 4, then the Fed increased the reserve ratio from 5 percent to 8 percent. the Fed increased the fed funds rate from 5 percent to 8 percent. the Fed increased the reserve ratio from 5 percent to 25 percent. the Fed decreased the fed funds rate from 8 percent to 5 percent. Question 30 (1 point) )Listen The FOMC is able to increase the money supply when it buys US government securities. The increase will be larger, the larger is the reserve ratio. buys US government securities. The increase will be larger, the smaller is the reserve ratio. sells US government securities. The increase will be larger, the smaller is the reserve ratio. sells US government securities. The increase will be larger, the larger is the reserve ratio.
1.If you deposit $100 in a bank account and the reserve ratio is 20 percent. a.What is the minimum amount of money banks will be required to keep in reserves? How much loans can banks make at most? What is the money multiplier? How much money can be created from $100 of reserves? b.lf the fed raises the required reserve ratio to 30 percent. What is the minimum amount of money banks will be required to keep in reserves? How much loans can banks make at most? What is the money multiplier? How much money can be created from $100 of reserves? N
6. Required and excess reserves Suppose that Second Republic Bank currently has $200,000 in demand deposits and $130,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Second Republic Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)
1. Suppose that a bank’s customer deposits $20,000 in her checking account. The required reserve ratio is 0.125. What are the required reserves on the new deposit? What is the largest loan that the bank can make on the basis of the new deposit? What is the maximum the banking system can increase demand deposits as a result of this deposit? -------------
2. Assume the reserve requirement forya banking system is 20%. Under the typical assumptions corresponding with the money multiplfer, if an autonomous injection of $10,000 is made, how will it affect: (a) The initial required reserves of the individual bank into which this deposit is made? (b) The initial excess reserves of the individual bank into which this deposit is made? (c) Total deposits in the entire banking system after all of the repercussions of this injection?. (d) Are there any factors that might not allow this to work in the real world in the way economic theory might suggest? If so, what are they?
9. How can banks create money? A) By lending required reserves B) By borrowing excess reserves C) By telling the Fed they need more money; and the Fed creates it D) By lending excess reserves 10. What is the formula for figuring the total possible change in the money supply from excess reserves? A) (1/Excess reserves) × / Total Reserves B) (R/1) × A Reserves C) / Excess Reserves / Total Reserves D) (1/R)x A Reserves