### Educational Resource: Understanding the Fed's Balance Sheet and Monetary Policy#### Question 3:Utilize the following information to determine the Fed’s balance sheet and calculate the Fed’s Monetary Liabilities:- **Currency in circulation**: $750 billion- **Reserves of the banking system**: $850 billion- **Government securities held by the Fed**: $450 billion- **Discount Loans**: $11,150#### Question 4:Use the Fed and the banking system T-accounts to describe the effects of a Fed sale of $200 million worth of government bonds to a bank that pays with part of its reserve held at the Fed. What would be the impact of this transaction on the Fed's monetary liabilities?#### Question 5:##### Money Multiplier: Given:\[ \text{Money Multiplier} = \frac{1 + c}{r + e + c} \]Where:- **r** = required reserve ratio = 0.10- **C** = currency circulation = $400 billion- **D** = checkable deposits = $800 billionThis section explains the basic concepts of the Fed's balance sheet, its components, and the influence of transactions on monetary liabilities. The money multiplier formula is introduced for understanding how money supply is affected by different economic variables.

Federal reserve bank is the reserve bank or central bank. Central banks balance sheet is the…

3: information Use the following Currency in circulation Reserves of the banking system = $850 billion Government securities held by the Fed = $450 Discount Loans = $1,150 = to determine the Fed's balance sheet and calculate the Fed's Monetary Liabilities: $750 billion

3: information Use the following Currency in circulation Reserves of the banking system = $850 billion Government securities held by the Fed = $450 Discount Loans = $1,150 = to determine the Fed's balance sheet and calculate the Fed's Monetary Liabilities: $750 billion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

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Use the following table to determine the levels of M1 and M2 in the United States. Money Categories in the United States Asset Amount (billions of dollars) Currency $84 Demand deposits 81 Money market funds 45 Other checkable deposits 38 Savings deposits 466 Small time deposits 23 Traveler's checks 5 Instructions: Enter your answers as a whole number. a. Calculate the M1 money supply. $ billion b. Calculate the M2 money supply. $ billion
Part 2 hand written plzz The Federal Reserve sells $26.00 million in Treasury securities. If the required reserve ratio is 10.00%, and all currency is deposited into the banking system, and banks hold excess reserves of 10%, then the maximum amount the money supply can decrease is $ million. (Insert your answer in millions, and round your answer to two decimal places.)
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?
23. Identify the four major methods the Fed uses to control the money supply. Give two examples of situations in which the Fed might use one of these methods and explain why that method is best for the given situation.
5. If reserves are scarce, how would the federal funds rate change (increase or decrease) if the Fed: 1) sells mortgage-backed securities 2) decreases the (minimum) reserve requirements 3) conducts overnight repo operations 4) conducts overnight reverse repo operations
9. Bank leverage Use the information presented in Midwestern Mutual Bank's balance sheet to answer the following questions. Bank's Balance Sheet Assets Liabilities and Owners' Equity Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities $750 Capital (owners' equity) $100 Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and the account. This would also bring the leverage ratio from its initial value of to a new value of Which of the following is true of the capital requirement? Check all that apply. Its intended goal is to protect the interests of the depositors. Its intended goal is to protect the interests of those who hold equity in the bank. It specifies a minimum leverage ratio for all banks.
Why does the Federal Reserve require commercial banks to have reserves? Explain why reserves are an asset to commercial banks but a liability to the Federal Reserve Banks. What are excess reserves? How do you calculate the amount of excess reserve held by a bank? What is significance of excess reserves?
Refer to the balance sheet for Bank X to answer questions 16. and 17 Bank X-Balance Sheet Liabilities: Checkable Deposits $80,000,000 $800,000 Assets: Reserves; Vault Cash Reserve Balance Account with the Fed $10,000,000 Loans Outstanding; Mortgage Loans $32,000,000 Business Loans 23,000,000 Personal Loans 11,000,000 U.S. Government Securities 3,200,000 Total Loans Outstanding $69,200,000 Total Assets $80,000,000 Assuming a 12% reserve ratio, bank X has excess reserves of: a. $1 million Ob. $1.2 million c. $100,000 d. -$1.2 million