3.7 points Save Question 20 Suppose the banking system in country A has $400 billion in total reserves and $5,000 billion in money supply. If the excess reserve ratio is 0%, and currency in circulation (C) is zero, the reserve requirement ratio is O a. 8 percent Ob. 12 percent Oc. 3 percent Od. Not enough information is provided to answer this question

3.7 points Save Question 20 Suppose the banking system in country A has $400 billion in total reserves and $5,000 billion in money supply. If the excess reserve ratio is 0%, and currency in circulation (C) is zero, the reserve requirement ratio is O a. 8 percent Ob. 12 percent Oc. 3 percent Od. Not enough information is provided to answer this question

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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18. Refer to Table 13.2. The required reserve ratio is 20%. If the First Charter Bank ismeeting its reserve requirement and has no excess reserves, its loans equal:a) $710b) $460c) $550d) $760
6. The reserve requirement, open market operations, and the moneysupply 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 $300. Determine the money multiplier as well as the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) 5 10 Simple Money Multiplier 20 10 A higher reserve requirement is associated with a smaller Money Supply (Dollars) 6,000 3,000 ▼ to 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%, the Fed will use open-market operations…
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Which of the following actions by the Bank of Canada will result in an immediate increase of approximately $600 million in excess reserves for banks? (Assume a target reserve ratio of 30%.) OA. Transfer $600 million out of commercial bank deposits into its own accounts OB. Purchase $857 million of government securities from the non-bank public, because of the 30% target reserve ratio OC. Purchase $600 million of government securities from the non-bank public OD. Purchase less than $600 million of government securities from the non-bank public E. Sell $857 million of government securities to banks, because of the 30% target reserve ratio OF. Sell $600 million of government securities to banks G. Sell less than $600 million of government securities to banks
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7. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Hubert, a client of First Main Street Bank, deposits $500,000 into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 10%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 500,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Eileen, who immediately uses the funds to write a check to Clancy. Clancy…
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Suppose the reserve requirement is 8% and a new deposit of $900 billion is made into the banking system. Create T accounts to analyze the following questions. a) Initially, reserves would increase by? b) Required reserves would increase by? c) Excess reserves would increase by? d) The first round of loans would amount to? e) The second round of loans would amount to approximately? f) The third round of loans would amount to approximately? g) For the entire macroeconomy, after the infinite rounds of loans were taken into account, money supply would increase by? h) If the Federal Reserve bought bonds worth $600 billion, money supply would increase by? i) If the Federal Reserve sold bonds worth $600 billion, money supply would decrease by?
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