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3. What will total reserves be equal to if the Fed buys $2 billion in securities (bonds) from banks

3. What will total reserves be equal to if the Fed buys $2 billion in securities (bonds) from banks

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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## Banking System Reserve and Deposit Multiplier Analysis ### Assets and Liabilities - **Assets:** - Total Reserves: $20 billion - Loans: $175 billion - Securities: $5 billion - **Liabilities:** - Checkable Deposits: $200 billion ### Questions: 1. **What is the reserve ratio if the banking system is fully loaned up?** - **Answer:** __________ 2. **What is the value of the deposit multiplier?** - **Use the reserve ratio from number 1 to respond to the remaining items.** - **Answer:** __________ 3. **What will total reserves be equal to if the Fed buys $2 billion in securities (bonds) from banks?** - **Answer:** __________ ### Instructions: For question 1, calculate the reserve ratio using the total reserves and checkable deposits. In question 2, apply the reserve ratio to determine the deposit multiplier. Finally, evaluate the impact on total reserves if the Federal Reserve purchases $2 billion in securities as addressed in question 3.
Transcribed Image Text:## Banking System Reserve and Deposit Multiplier Analysis ### Assets and Liabilities - **Assets:** - Total Reserves: $20 billion - Loans: $175 billion - Securities: $5 billion - **Liabilities:** - Checkable Deposits: $200 billion ### Questions: 1. **What is the reserve ratio if the banking system is fully loaned up?** - **Answer:** __________ 2. **What is the value of the deposit multiplier?** - **Use the reserve ratio from number 1 to respond to the remaining items.** - **Answer:** __________ 3. **What will total reserves be equal to if the Fed buys $2 billion in securities (bonds) from banks?** - **Answer:** __________ ### Instructions: For question 1, calculate the reserve ratio using the total reserves and checkable deposits. In question 2, apply the reserve ratio to determine the deposit multiplier. Finally, evaluate the impact on total reserves if the Federal Reserve purchases $2 billion in securities as addressed in question 3.
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