Consider the following situation in the Canadian banking system: The Bank of Canada purchases $3 million worth of government securities from an investment dealer with a cheque drawn on the Bank of Canada. • The dealer deposits this cheque at Bank XYZ, a commercial bank. The target reserve ratio for all banks is 30 percent. All commercial banks operate with no excess reserves. . There is no cash drain. If Bank XYZ increases its loans to the maximum extent possible with its new excess reserves, the fourth-generation banks will be able to expand their loans by OA. $0.50 million. B. $0.72 million. OC. $0.58 million.

Consider the following situation in the Canadian banking system: The Bank of Canada purchases $3 million worth of government securities from an investment dealer with a cheque drawn on the Bank of Canada. • The dealer deposits this cheque at Bank XYZ, a commercial bank. The target reserve ratio for all banks is 30 percent. All commercial banks operate with no excess reserves. . There is no cash drain. If Bank XYZ increases its loans to the maximum extent possible with its new excess reserves, the fourth-generation banks will be able to expand their loans by OA. $0.50 million. B. $0.72 million. OC. $0.58 million.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following is information about a banking system (all figures are in $millions): Target reserve ratio New cash deposits into the whole system Excess reserves before the above 10 percent $20 0 deposits Refer to the above information to answer this question. What will the $20 of new deposits into chequing accounts initially create? a. $18 of excess reserves. b. $100 of new demand deposits. c. $18 of new demand deposits. d. Excess reserves of $20.
Page 4 5. Use the following T-account information and the fact that the required reserve ratio in this economy is 0.10 (i.c., 10 %) to answer the questions below (Show your work) Treasury dd T 20 Bonds 600 Bonds Loans to Fed 300 dd 190 B dd 100 T 20 Banks FRN 200 Public 1500 Loans from Banks 850 Banks Cash 60 dd p 1500 dd p P dd B 190 Other Cash 150 Loans to Deposits 100 Bonds 100 Public 850 Loans from Other Bonds 100 Fed 100 Deposits 100 a. What are the Bank Reserves? b. What are the Bank Required Reserves? c. What are the Bank Excess Reserves? d. What is the current Money Supply (MI)? e. If Banks maximized their Loans to the Public, using up all their excess reserves, what will be the new Money Supply? f. The Fed did not like the new Money Supply and sold 40 in Bonds to Banks. After the banks bought the bonds, they have to call in loans from the public. What will be the new Money Supply end up being after the banks made the required changes? g. If the Banks refused the buy the 40 in…
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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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10. If the reserve ratio is 20% and the banking system has excess reserves of $50, the maximum amount of new deposits that can be created through lending is $ Type your answer here
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