26. Sally's grandmother has kept $100,000 in a cookie jar for years and gives it so Sally, who immediatelyputs it into her bank in a savings account. The bank has a 20% reserve rate. Which of the following istrue?1.Excess reserves increase by $20,000II.The money supply increases by as much as $120,000III.There is no change in the bank's money supplyIa.I onlyb. II onlyC.I and IId. None of the above4DELL33US 19

I. Excess reserves increase by $20,000:The amount of reserves that banks hold in excess of what is…

Answered: 26. Sally's grandmother has kept…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 1. A bank has $140,000 in reserves, $1,600,000 in loans, and checkable deposits of $1,250,000. If the required reserve ratio is 10%, how are reserves split between required reserves and excess reserves?
1. The Federal Reserve a. Is the large stockpile of currency reserved for wartime uses b. May be used for Federal, but not state government uses c. Is responsible for controlling the money supply d. Was established in 1789 with the ratifying of the Constitution 2.In a system of 100% reserve banking, $100 is deposited. What is the money multiplier? a. Depends on what is withdrawn from the account b. 1 c. $100 d. There is insufficient information to state the value of the money multiplier
"If the required reserve ratio is 20% and the current deposit is $50,000. Calculate the amount of new money created." O"$200,000" O "$250,000" O"$10,000" "$40,000"
When bankers hold excess reserves: A. The size of the monetary multiplier increases B. The money- creating potential of the banking system increases c. The money-creating potential of the banking system decreases D. There is no change in the money-creating potential of the banking system
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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
Jamie made a cash deposit to her checking account. This resulted in an increase in the money supply of $23,000. The reserve requirement is 4%, and all banks keep excess reserves equal to 4% of checking deposits. What was the amount of Jamie's deposit? A. $1.840 B. $2,000 C. $920 D. $1,000
12
1.What is the money multiplier if the target reserve ratio ofbanks is 4%? 2. If the target reserve ratio for a bank is 5%, deposits are $1billion, and loans are $800 million, what are the targetreserves?$50 million•80%$40 million$200 million3. Which measurement of the money in Canada will be the largest? 4. Is there more money or currency in Canada?5.
#27. Reserve requirements are regulations concerning a the interest rate at which banks can borrow from the Fed. b the amount banks are allowed to borrow from the Fed. c the amount of reserves banks must hold against deposits. d reserves banks must hold based on the number and type of loans they make.
10. If the reserve ratio is 20% and the banking system has excess reserves of $50, the maximum amount of new deposits that can be created through lending is $ Type your answer here
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

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