Assume the required reserve ratio is 20%, and a bank's excess reserves are $50 million.Which of the following accurately explain why checkable deposits resulting from new loans based on excess reserves are not likely to generate themaximum of $50 million x 5 = $250 million? Check all that apply.Some banks want to hold some excess reserves instead of making loans.Some banks want to make more loans than their reserves will allow.Some depositors want to hold a portion of their money in cash.Some people want to use credit cards to make all of their purchases and keep their cash in the bank.

Some banks want to hold some excess reserves instead of making loans: Banks don't necessarily lend…

Answered: Assume the required reserve ratio is…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.3P

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ou just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 1212%, how much will your deposit increase the total value of checkable bank deposits? $ If the reserve requirement is 44%, how much will your deposit increase the total value of checkable deposits? $ Increasing the reserve requirement the money supply.
Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve requirement is 5%. How much maximum of new money will be created (maximum amount of new checking deposits created by the banking system) as a result of your bank deposit? Hint: do not count your initial deposit as part of increase. Number $70000 ☐ ☐ Incorrect. The bank can only loan out excess reserves. Calculate the excess reserves after the lottery winnings were deposited, than multiple that number by the money multiplier. Which events could cause the increase in the money supply to be less than its potential? Check all that apply. Some loan recipients choose to hold some cash instead of depositing all of it in banks. All money loaned out is deposited back into the banking system. Banks decide to keep some excess reserves on hand. Banks choose to loan out all excess reserves.
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 (Dollars) 500,000 Change in Excess Reserves (Dollars) Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Neha, who immediately uses the funds to write a check to Lorenzo. Lorenzo deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls Fergo Bank lends out all of its new excess reserves to Andrew, who writes a check to Teresa, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves to Beth in turn. Fill in the following table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar. Southeast Mutual Bank Walls Fergo Bank PJMorton Bank Increase in Deposits…
Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%. 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) 750,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Kate, who immediately uses the funds to write a check to Hubert. Hubert deposits the funds immediately into his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Shen, who writes a check to Poornima, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Valerie in turn. Fill in the following table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar. Increase in Deposits Increase in Required Reserves…
You just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 20%, how much will your deposit increase the total value of checkable bank deposits? If the reserve requirement is 8%, how much will your deposit increase the total value of checkable deposits? Increasing the reserve requirement decreases the money supply. %24 %24
Excess reserves are insurance from deposit outflow. Suppose you hold 15 million required reserves and 45 million excess reserves at the central bank. The total interest payment on reserves from the central bank is 0.3%. If you do not hold your excess reserves at the bank, you may take loans and earn 4% in average. What is the cost of holding excess reserve at the central bank?
macmillan learning Suppose that the legal reserve ratio set by the Fed is 10% and that the Fair Bank in Fairdealing, Missouri, initially has checkable deposit equal to $240 and a reserve account of $70. A customer of Fair Bank deposits $100 into her checking account. Fair Bank loans 80% of the deposit and places the rest in its reserves at the St. Louis Fed. For simplicity, assume the borrower received the loan as cash. How much does Fair Bank have in excess reserves after the deposit and loan? Number Place the figures below to represent changes in the accounts of Fair Bank and the Federal Reserve of St. Louis' balance sheets resulting from the deposit and loan. Hint Cash: Reserves: Loans: Property: $ +$100 +$80 Balance Sheet: Fair Bank Liabilities: Net equity: +$20 -$100 -$20 +$10 -$80 -$10 Balance Sheet: Saint Louis Fed Liabilities: Cash: Property: Loans: Previous Check Answer Next Exit
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Suppose that Kesha deposits $7,000 into her savings account at First Bank. The reserve requirement facing First Bank is 9%. Instructions: Enter your answer as a whole number, If you are entering a negative number include a minus sign. a. Use this information to show how First Bank's assets and liabilities Initially change when Kesha deposits the $7000 in the bank. A Simple Bank Balance Sheet Assets Liabilities Change in Reserves: $ Change in Deposits: $ b. How much money can First Bank lend out to other people? c. Now suppose that First Bank holds no excess reserves and lends out all of the excess reserves resulting from Kesha's deposit. How do First Bank's assets and labilities change? A Simple Bank Balance Sheet Assets Liabilities Change in Reservesi Change in Loans
Please be sure to explain why and how to the questions -Thank you
Suppose that Kesha deposits $7,000 into her savings account at First Bank. The reserve requirement facing First Bank is 8%. Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. Use this information to show how First Bank's assets and liabilities initially change when Kesha deposits the $7,000 in the bank. A Simple Bank Balance Sheet Assets Change in Reserves: $ Liabilities Change in Deposits: $ b. How much money can First Bank lend out to other people? $ c. Now suppose that First Bank holds no excess reserves and lends out all of the excess reserves resulting from Kesha's deposit. How do First Bank's assets and liabilities change? A Simple Bank Balance Sheet Assets Change in Reserves: $ Change in Loans: $ Liabilities n
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