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 50 Loans 25 Securities 20 Total 50 Total 50 What is the required reserve ratio? 25% 40% 5% 10% Suppose that the Federal Reserve (the "Fed") buys $4 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 $4 million, and the banking system's holdings of securities rise by $4 million. The banking system's holdings of securities rise by $4 million, and the banking system's total reserves fall by $4 million. Checkable deposits rise by $4 million, and the banking system's total reserves rise by $4 million. The banking system's holdings of securities fall by $4 million, and the banking system's total reserves rise by $4 million. As a result of the Fed's purchase of $4 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 50 Loans 25 Securities 20 Total 50 Total 50 What is the required reserve ratio? 25% 40% 5% 10% Suppose that the Federal Reserve (the "Fed") buys $4 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 $4 million, and the banking system's holdings of securities rise by $4 million. The banking system's holdings of securities rise by $4 million, and the banking system's total reserves fall by $4 million. Checkable deposits rise by $4 million, and the banking system's total reserves rise by $4 million. The banking system's holdings of securities fall by $4 million, and the banking system's total reserves rise by $4 million. As a result of the Fed's purchase of $4 million of securities, checkable deposits in the banking system can potentially by as much as
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
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 | 50 |
| Loans | 25 | ||
| Securities | 20 | ||
| Total | 50 | Total | 50 |
What is the required reserve ratio?
25%
40%
5%
10%
Suppose that the Federal Reserve (the "Fed") buys $4 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 $4 million, and the banking system's holdings of securities rise by $4 million.
The banking system's holdings of securities rise by $4 million, and the banking system's total reserves fall by $4 million.
Checkable deposits rise by $4 million, and the banking system's total reserves rise by $4 million.
The banking system's holdings of securities fall by $4 million, and the banking system's total reserves rise by $4 million.
As a result of the Fed's purchase of $4 million of securities, checkable deposits in the banking system can potentially by as much as .
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