3. The central bank holds $1,400 in government securities. The commercial banks have deposited $30 with the central bank and hold $100 in vault cash. $700 are held as currency by the public. The require reserve ratio is 20%. Banks are loaned up. (a) Fill the central bank's T-account below. Assets Liabilities Gov't securities Reserves Currency in circulation (This is not a complete T-account. The two sides may not be equal.) (b) What is the money supply?

3. The central bank holds $1,400 in government securities. The commercial banks have deposited $30 with the central bank and hold $100 in vault cash. $700 are held as currency by the public. The require reserve ratio is 20%. Banks are loaned up. (a) Fill the central bank's T-account below. Assets Liabilities Gov't securities Reserves Currency in circulation (This is not a complete T-account. The two sides may not be equal.) (b) What is the money supply?

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 2. this question has three parts; 2a, 2b, and 2c. The Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $5000 in currency into the bank and that currency is added to reserves. 2a. How much excess reserves does the bank now have? Show your computation.(Recall, to calculate checkable deposits you have to add the original checkable deposits to the new deposit. To calculate required reserves for the deposits, you have to multiply the required reserve ratio (decimal from) by checkable deposits. To calculate excess reserves, you will subtract required reserves from actual reserves.) 2b. Complete the table below for the Third National Bank. Classify the assets and liabilities and net worth. What is the total assets of Third National Bank? The table is in the attachment. 2c. If the required reserve ratio for the Third National Bank is 10 percent, what is the monetary multiplier? (Recall, to…
Assets Answer: Liabilities Required Reserves: $460000 Loans $150000 Bonds: $1940000 The above is the T-Accounts for TD bank. If the reserve ratio is 10 percent, what is the change in loans after the excess reserves are loaned out? Deposits: $2550000 Capital: 0
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Initial deposit ($100) The Money Multiplier Process Loan Loan $ University Bank Excess reserves: $25 Required reserves: $75 Deposit Bank #2 Deposit Excess reserves: $6.25 Required reserves: $18.75 Instructions: Round your responses to two decimal places. a. What volume of loans can the banking system in the figure support? Bank #3 Loan Deposit Excess reserves: $1.56 Required reserves: $4.69 Bank #4 etc. Excess reserves: $0.39 Required reserves: $1.17 b. If the reserve requirement were 15 percent rather than 75 percent, what would the system's lending capacity be?
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2. Here is the balance sheet of the consolidated banking system of the country of Zargadee (all entries are in millions): Consolidated Balance Sheet of the Entire Economy of Zargadee Assets Reserves Cash in Vault Deposits at CBZ Bonds Loans 50 90 Total Reserves Total Assets 140 460 1000 1600 Liabilities Deposits Borrowing from CBZ Total Liabilities 1400 200 1600 Assume that 1) households hold no currency and 2) banks hold no excess reserves. The current reserve requirement is 10%. The Central Bank of Zargadee (CBZ) uses the three traditional tools to perform monetary policy in an economy that is reserve constrained. a. Under our assumptions, what is the money multiplier? For each part (b)-(d) below, i) Conceptually explain the effect of the policy on the money supply. ii) Calculate the change in M1 given our assumptions. iii) Construct the new balance sheet of the consolidated banking system of Zargadee under the new policy. iv) When the money supply changes, list a chain of events to…
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26. To be considered money, a financial asset must be Group of answer choices a. Convertible into gold or silver. b. Serving as a medium of exchange, standard of value, and store of value. c. Coins, currency, or fractional reserve. d. Issued by the Federal Reserve System. e. Kept in banks.