Assume that the following data describe the current condition of the commercial banking system: Value $ 100 billion Total reserves: Transactions deposits: $ 800 billion Cash held by public: $300 billion Required reserve ratio: 0.10 Instructions: Enter your responses as a whole number. In part b, round your response to one decimal place. Now assume that the public transfers $50 billion in cash into transactions accounts. How much would the total lending capacity of the banking system be after this portfolio switch? $ How large would the money supply be if the banks fully utilized their lending capacity? billion $ billion

Assume that the following data describe the current condition of the commercial banking system: Value $ 100 billion Total reserves: Transactions deposits: $ 800 billion Cash held by public: $300 billion Required reserve ratio: 0.10 Instructions: Enter your responses as a whole number. In part b, round your response to one decimal place. Now assume that the public transfers $50 billion in cash into transactions accounts. How much would the total lending capacity of the banking system be after this portfolio switch? $ How large would the money supply be if the banks fully utilized their lending capacity? billion $ billion

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

Consider the following T-account for National City Bank: Assets Reserves $10,000 Loans $90,000 A) $10,000 If the required reserve ratio is lowered to 8 percent, how much can National City loan out? B) $8,000 C) $2,000 Liabilities D) $0 Deposits $100,000
Answer the next question(s) on the basis of the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 10 percent. All figures are in billions. Assets Liabilities and net worth Reserves $ 30 Checkable $300 deposits Securities 70 Stock shares 130 Loans 130 Property 200 Refer to the above data. After the deposit, the maximum amount by which this commercial banking system can expand the supply of money by lending is: A)$9 billion. $45 billion. $36 billion. $90 billion.
1.4
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…
Consider that there is only one bank and its balance sheet is as shown. Let rrD = 10%. If $100 in demand deposits were withdrawn this will deplete the bank's reserves and they will have to sell off some of its loan portfolio to make up the difference and to restore the reserves that are still required for the remaining deposit balance. After the bank has restored equilibrium, what would be the remaining loan balance? Assets Liabilities Reserves $60 Demand Deposits $500 Loans $440 O $320 O $360 O $400 O $200 O It cannot be determined precisely, but it would be less than $100.
5. 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%. Carlos, 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 (Dollars) (Dollars) rves Chan in Required Reserves (Dollars) 500,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Amy, who immediately uses the funds to write a check to Van. Van deposits the funds immediately into his checking account at Second Republic Bank. Then Second…
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.
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?
Please see below. True or false questions. I need help with both. All forms of money that go into M2 also go into M1. True or False (I got False for this one). A bank's assets includes the money deposited there by individuals. True or False (I got false for this one because money deposited by individuals would be considered a liability because that is something that can be taken out at anytime by the depositor).
One of the major functions of commercial banks is credit creation. Commercial banks create credit by advancing loans and purchasing securities. They lend money to individuals and businesses out of deposits accepted from the public. Commercial banks have to maintain a specified percentage of their deposits as liquidity which is set by the central bank. This reserve requirement controls the extent to which commercial banks can grow money in the economy. Assuming you only have one commercial bank in your economy, a reserve requirement of 20% and an initial deposit of 200. REQUIRED: A. Show for the first four days and the last day the balance sheet of your commercial bank.
Analyze the potential impact of a prolonged period of negative interest rates on the banking sector's profitability and lending behavior. Additionally, investigate how such an interest rate environment might alter consumer savings rates, corporate investment decisions, and the overall risk appetite within financial markets.
Consider an individual who immigrates to Canada and deposits $5,000 into the Canadian banking system. Suppose that all commercial banks have a target reserve ratio of 10 percent and that individuals do not hold any cash from the loans borrowed from the banking system. The eventual total change in deposits of the banking system after this impact is $ 50000. The eventual total change in reserves of the banking system after this impact is $ The eventual total change in loans of the banking system after this impact is $