Assume a bank has reserves of $21 million and demand deposits of $200 million. Legal Reserve Requirements for Checking Accounts, effective January 18, 2018** $0 million - $16 million 0% $16 million - $122.3 million 3. over $122.3 million 10 Time deposits have 0% reserve requirement. The numerical boundaries of these limits are revised annually. Instructions: Round your answers to one decimal place. a) How much are the bank's required reserves? %$4 million. b) How much are the bank's excess reserves? million. %24

Assume a bank has reserves of $21 million and demand deposits of $200 million. Legal Reserve Requirements for Checking Accounts, effective January 18, 2018** $0 million - $16 million 0% $16 million - $122.3 million 3. over $122.3 million 10 Time deposits have 0% reserve requirement. The numerical boundaries of these limits are revised annually. Instructions: Round your answers to one decimal place. a) How much are the bank's required reserves? %$4 million. b) How much are the bank's excess reserves? million. %24

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Part 2 - Practice- Use the balance sheet for Leon’s Bank below to answer the following questions. Assets Liabilitis Required reserves $1,000 Demand deposits $10,000 Excess reserves $0 Owner’s equity $10,000 Customer loans $8,000 Government securities (bonds) $7,000 Building and fixtures $4,000 1. Calculate the required reserve ratio. Explain how you got your answer. 2. Suppose that an individual deposits $5,000 of cash into her checking account. What is the immediate effect of the cash deposit on the M1 measure of the money supply? Explain. 3. What is the dollar value of the bank’s required reserves after the $5,000 deposit in question #7? Explain. 4. What is the dollar value of the bank’s excess reserves after the $5,000 deposit in question #7? Explain. 5. Calculate the maximum amount that the money supply can change as a result of the $5,000 deposit in question #7. Show your work.
Table 1 shows the financial position of the Smithville Bank once $4441.00 has been deposited. Assume that the required reserve ratio is 7.00%. Table 1. Original Assets and Liabilities The bank manager decides to lend Billy Bob Smith all of Assets Liabilities the bank's excess reserves. Billy Bob takes the funds to Eula Mae's Used Machines and buys a pickup truck. Eula reserves: $4441.00 deposits: $4441.00 Mae then deposits the money in her account back at the Smithville Bank. Table 2. Assets and Liabilities After Bank Makes a Loan Table 2 should show the bank's accounts after the loan is made and the funds again deposited. Round all answers to Assets Liabilities the nearest cent. reserves: ? deposits: ? loans: ? What are the bank's loans in Table 2? What are the bank's reserves in Table 2? What are the bank's deposits in Table 2? %24 %24 %24
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…
Your bank has the following balance sheet: Assets Liabilities Checkable Reserves $90 million $380 million deposits $130 Securities million Loans $200 million Bank capital $40 million If the required reserve ratio is 20%, what will be the size of this bank (as measured by its total assets or liabilities) after $20 million deposit outflow if it just meets reserve deficiency by taking out a discount loan from the Federal Reserve? $402 million $400 million. OOOO $420 million. $412 million.
Total reserves $55 billion Transactions deposits: $600 billion Cash held by public: $400 billion Bonds held by public: $400 billion Stocks held by public: $140 billion Gross domestic product: $8 trillion Interest rate: 6 percent Required reserve ratio: 0.10 How large is the money supply (M1)? How much excess reserves are there? What is the money multiplier? What is the available lending capacity?
2. Consider the following data (all values are in billions of dollars): (b) Currency Transactional deposits Bank reserves June 1930 June 1931 June 1932 $ 3.681 3.995 4.959 21.612 19.888 15.490 3.227 3.307 2.829 (a) Calculate the values for each period for the currency-deposit ratio, the ratio of total reserves to deposits, the monetary base, M1, and the money multiplier. Can you explain why the currency-deposit ratio and the ratio of total reserves to deposits moved as they did between 1930 and 1932(Great depression era)?
When the reserve requirement changes, which of the following will change for an individual bank? Multiple Choice a.) transactions account balances and lending capacity b.) required reserves, excess reserves, and lending capacity c.) transactions account balances, total reserves, and excess reserves d.) total reserves, required reserves, and excess reserves
Assuming that the reserve ratio is 10%, what amount of excess reserves are held by with the bank balance sheet listed below? Assets Liabilities & Net Worth Reserves $280,000 Checking deposits $2,800,000 Loans Outstanding $2,920,000 Total $3,200,000 Net Worth Stockholders' Equity $400,000 Total $3,200,000 a. $240,000 b. zero c. $320,000 d. $280,000
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)
14. With reference to the Federal Reserve's M1 and M2 measures of the money supply, please indicate whether funds held in each of the forms listed below are included only in M1, only in M2, in both M1 and M2, or in neither M1 nor M2. (a) Money market mutual fund shares. (b) Bank reserves. ге (c) Demand deposits. (d) Small (under $100,000) certificates of deposit. (e) Currency in circulation.
© Macmillan Learning What is the bank's net worth? Assume that the T-chart shows the financial position of a small local bank. Assets Loans: $27.00 Bonds: $13.00 Reserves: $43.00 Liabilities Deposits: $30.00
45) First National Bank has $160 million in checkable deposits, $30 million in deposits with the Federal Reserve, $10 million cash in the bank vault, and $10 million in government bonds. Given the bank's minimum reserve ratio of 20% and a goal of holding zero excess reserves, how much can the bank issue in additional loans? a) $152 million b) $16 million c) $12 million d) $8 million.