5. Consider the T-table of the Bank of Boston. Suppose the Federal Reserve Bank buys an additional $2 mllion in government bonds from the Bank of Boston. Assume (1) the required reserve ratio is 10 percent, and (2) the Bank of Boston issues all excess reserves in loans (I.e., there are no excess reserves). The new money supply equals $ millon. Submit Balance sheet of the Bank of Boston Assets Liabilities $5,000,000 Checkable deposits +S5.000,000 Government bonds Currency (bank reserves) +$5,000,000 Loans SO

5. Consider the T-table of the Bank of Boston. Suppose the Federal Reserve Bank buys an additional $2 mllion in government bonds from the Bank of Boston. Assume (1) the required reserve ratio is 10 percent, and (2) the Bank of Boston issues all excess reserves in loans (I.e., there are no excess reserves). The new money supply equals $ millon. Submit Balance sheet of the Bank of Boston Assets Liabilities $5,000,000 Checkable deposits +S5.000,000 Government bonds Currency (bank reserves) +$5,000,000 Loans SO

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Suppose that Kesha deposits $8,000 into her savings account at First Bank. The reserve requirement facing First Bank Is 20%. Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. Use this information to show how First Bank's assets and liabilities Initially change when Kesha deposits the $8,000 in the bank. A Simple Bank Balance Sheet Assets Change in Reserves: $ Liabilities Change in Deposits: $ b. How much money can First Bank lend out to other people? $ c. Now suppose that First Bank holds no excess reserves and lends out all of the excess reserves resulting from Kesha's deposit. How do First Bank's assets and liabilities change? A Simple Bank Balance Sheet Assets Change in Reserves: $ Change in Loans: $ Liabilities
Assets Liabilities Reserve 200 Deposits 1000 Loan 800 Total 1000 Total 1000 1. Assuming the bank does not hold any excess reserve, what is the required reserve ratio? 2. What is The value of deposit expansion multiplier ? Note : show your calculations
8. The reserve requirement, open market operations, and the money supply 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 $400. Determine the money multiplier as well as the money supply for each reserve requirement listed in the following table. Reserve Requirement Simple Money Multiplier Money Supply (Percent) (Dollars) 20 10 A higher reserve requirement is associated with a 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%,…
4
E3
The table below shows information for United Bank. Deposits Reserves Reserve Requirement $300 million $33 million 10% 37 Which of the following statements is true concerning United Bank in the federal funds market? Multiple Choice United Bank will lend $3 million reserves in the federal funds market. United Bank will borrow $30 million reserves in the federal funds market. United Bank will lend $33 million reserves in the federal funds market. United Bank will borrow $3 million reserves in the federal funds market. # % &
8. A bank's "required reserves" are: none of the answers given is correct held as deposits with the Federal Reserve System equal to its transactions deposits equal to its checkable deposits
9.
14. Suppose the actual overnight interest rate is 5%. If the central bank lowers its target overnight rate to 4.5%, the money supply will eventually decrease as a result of an increase in excess reserves in the banking system. decrease as a result of open-market operations. increase as a result of open-market operations. decrease as a result of a decrease in the demand for new loans. increase as a result of an increase in excess reserves in the banking system.
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
2
Chapter 16: Reserves = $1,500 First national bank Loaned = $8,500 Chapter 17: Deposits = $10,000 Money Created = Amount x MM 1. If the bank has to maintain a required reeserve ratio of 10% then what is the excess reserve if any? 1/P 2. If the reserve ratio is 10% then what will be money multiplier 3. How much extra money the bank will be able to create with an addtional MS 3/4 # 1/2 0 Total Reserve = Required Reserve + Excess Reserve Money Multiplier = 1/R Where R is Reserve Ratio MD 1. What is the price level at the equilibirum? 2. What is the value of money at the equilibirum? 3. If the velocity is 4, money supply is 100, price level is 10 then what will be the output? MXV=PXY P= Price level Value of Money = 1/P