7. For this table, assume that all banks observe the same desired reserve ratio. Also assume that the banks are listed in sequential order (thus the loans from the First National Bank become the deposits for the Second National Bank, and the loans from the Second National Bank become the deposits for the Third National Bank, and so on). Also, the bank's balance sheets must always be balanced. Table: Multiple Deposit Expansion First National Bank ASSETS Required reserves Loons TOTAL $368.000 Second National Bank ASSETS Required reserves Loans TOTAL Third National Bank ASSETS Required reserves Loons TOTAL O 8% O 20% LIABILITIES Deposits $400,000 TOTAL LIABILITIES Deposits TOTAL LIABILITIES Deposits TOTAL Refer to the table. For the multiple deposit expansion process described in this table, what is the reserve ratio in this banking system? O 92% 10%

7. For this table, assume that all banks observe the same desired reserve ratio. Also assume that the banks are listed in sequential order (thus the loans from the First National Bank become the deposits for the Second National Bank, and the loans from the Second National Bank become the deposits for the Third National Bank, and so on). Also, the bank's balance sheets must always be balanced. Table: Multiple Deposit Expansion First National Bank ASSETS Required reserves Loons TOTAL $368.000 Second National Bank ASSETS Required reserves Loans TOTAL Third National Bank ASSETS Required reserves Loons TOTAL O 8% O 20% LIABILITIES Deposits $400,000 TOTAL LIABILITIES Deposits TOTAL LIABILITIES Deposits TOTAL Refer to the table. For the multiple deposit expansion process described in this table, what is the reserve ratio in this banking system? O 92% 10%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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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6. Required and excess reserves Suppose that Second Republic Bank currently has $200,000 in demand deposits and $130,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Second Republic Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)
11 1 point Table 30-4 Reserves Loans Bank of Socorro Assets Liabilities $4,800 Deposits 75,200 $80,000 Refer to Table 30-4. Assume the Fed's reserve requirement is 4 percent and all banks besides the Bank of Socorro are exactly in compliance with the 4 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Socorro decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase? $40,756.98 $40,000.00 $26,666.67 $42,930.49
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4. The combined balance sheet of all the commercial banks in the economy is as follows (in billions of dollars): Assets Liabilities Reserves 25 Deposits 250 Government Securities 75 Loans 150 a) Assume this bank has no excess reserves, what is the reserve requirement? b) If the Fed purchases securities of $25 billion, how much in excess reserves do the banks have immediately after this transaction? c) By how much would the money supply increase if the banks fully utilized their lending capacity capacity and all money lent was redeposited into the banking system? hp