Answer the next question on the basis of the following consolidated balance sheet ofthe commercial banking system. Assume that the reserve requirement is 20%. Allfigures are in billions.Liabilities & Net Worth (billions ofdollars)Assets (billions of dollars)Reserves$200 Checkable deposits$1000Securities300Stock shares400Loans500Property400Suppose the Fed wants to increase the money supply by $1,000 billion to drive downinterest rates and stimulate the economy. To accomplish this, it could lower thereserve requirement from 20% toA) 12%OB) 15%C) 14%D) 10%

Given required reserve ratio = 20 % Required reserves = 200 $increase in money supply = 1000…

Answered: Answer the next question on the basis…

Answer the next question on the basis of the following consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 20%. All figures are in billions.

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

The accompanying table gives data for a commercial bank or thrift. If the legal reserve ratio falls from 25 percent to 10 percent, reserves of this single bank will
The commercial banking system has excess reserves of $4,000. Then new loans of $30,000 are subsequently made, and the system ends up just meeting its reserve requirements. The required reserve ratio must be _%. Your Answer: Answer
Briefly discuss the importance of the Depository Institutions Deregulation and Monetary Control Act of 1980.
Banks acquire $50 billion in new reserves, and the reserve requirement ratio is 6%. What will be the impact on the total deposits in the system, assuming all excess reserves are loaned to borrowers and the public redeposits all the borrowed funds in the banking system?
Suppose the simplified consolidated balance sheet shown below is for the entire commercial banking system and that all figures are in billions of dollars. The reserve ratio is 25 %. Refer to the balance sheet below. Enter your answers as whole numbers. A) What is the amount of excess reserves in this commercial banking system? What is the maximum amount the banking system might lend? Show in columns 1(a) and 1'(a) how the consolidated balance sheet would look after this amount has been lent. What is the size of the monetary multiplier? B) Using the original figures, answer the questions in part A assuming the reserve ratio is 20%. What is the amount of excess reserves in this commercial banking system? What is the maximum amount the banking system might lend? Show in columns 1(b) and 1'(b) how the consolidated balance sheet would look after this amount has been lent. What is the monetary multiplier? What is the resulting difference in the amount that the commercial banking…
Answer the next questions based on the following consolidated balance sheet for the whole commercial banking system for a hypothetical economy. Assume the required reserve ratio is 20%. All figures are in billions of dollars. Assets Liabilities + Net Worth Reserves $ 60 Securities 140 Loans 100 Property 400 Checkable deposits $200 Stock shares 500 What is the amount of excess reserves in this commercial banking system? What is the maximum amount that the money supply can be expanded? Show your workings. If the reserve ratio fell to 10%, what is now the maximum amount that the money supply can be expanded? Show your workings.
The fractional reserve characteristic of the banking system allows banks to create money and also create wealth from bank deposits. True or false?
What types of regulations commercial banks are subject to and why commercial banks are subject to reserve requirement?
Describe why some banks maintain a relationship with a correspondent bank.
Safety of money: Is your money equally, more, or less safe in a “foreign” bank? Explain your reasoning.
What will be the estimated money multiplier if the cash reserve ratio in the economy is 8%
If the actual reserve ratio is 16%, what is the money multiplier? Include up to two decimal places, if needed.