Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets Liabilities and Net Worth (Billions of Dollars) Total reserves 5 Checkable deposits 100 Loans 45 Securities 50 Total 100 Total 100 What is the required reserve ratio? 25% 40% 10% 5% Suppose that the Federal Reserve (the "Fed") buys $8 million of bonds from a bond dealer, who immediately deposits the funds in her checking account. What is the initial impact of this transaction? Checkable deposits rise by $8 million, and the banking system's holdings of securities rise by $8 million. The banking system's holdings of securities rise by $8 million, and the banking system's total reserves fall by $8 million. The banking system's holdings of securities fall by $8 million, and the banking system's total reserves rise by $8 million. Checkable deposits rise by $8 million, and the banking system's total reserves rise by $8 million. As a result of the Fed's purchase of $8 million of securities, checkable deposits in the banking system can potentially by as much as .
Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets Liabilities and Net Worth (Billions of Dollars) Total reserves 5 Checkable deposits 100 Loans 45 Securities 50 Total 100 Total 100 What is the required reserve ratio? 25% 40% 10% 5% Suppose that the Federal Reserve (the "Fed") buys $8 million of bonds from a bond dealer, who immediately deposits the funds in her checking account. What is the initial impact of this transaction? Checkable deposits rise by $8 million, and the banking system's holdings of securities rise by $8 million. The banking system's holdings of securities rise by $8 million, and the banking system's total reserves fall by $8 million. The banking system's holdings of securities fall by $8 million, and the banking system's total reserves rise by $8 million. Checkable deposits rise by $8 million, and the banking system's total reserves rise by $8 million. As a result of the Fed's purchase of $8 million of securities, checkable deposits in the banking system can potentially by as much as .
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves .
|
Assets
|
Liabilities and Net Worth
|
||
|---|---|---|---|
|
(Billions of Dollars)
|
|||
| Total reserves | 5 | Checkable deposits | 100 |
| Loans | 45 | ||
| Securities | 50 | ||
| Total | 100 | Total | 100 |
What is the required reserve ratio?
25%
40%
10%
5%
Suppose that the Federal Reserve (the "Fed") buys $8 million of bonds from a bond dealer, who immediately deposits the funds in her checking account. What is the initial impact of this transaction?
Checkable deposits rise by $8 million, and the banking system's holdings of securities rise by $8 million.
The banking system's holdings of securities rise by $8 million, and the banking system's total reserves fall by $8 million.
The banking system's holdings of securities fall by $8 million, and the banking system's total reserves rise by $8 million.
Checkable deposits rise by $8 million, and the banking system's total reserves rise by $8 million.
As a result of the Fed's purchase of $8 million of securities, checkable deposits in the banking system can potentially by as much as .
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