7. Bank capital is equal to ________ minus ________. Question 7 options: a) total assets; total reserves b) total liabilities; total assets c) total liabilities; total borrowings d) total assets; total liabilities

7. Bank capital is equal to minus . Question 7 options: a) total assets; total reserves b) total liabilities; total assets c) total liabilities; total borrowings d) total assets; total liabilities

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter12: Money And Banking

Section: Chapter Questions

Problem 10E

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Question

Bank capital is equal to ________ minus ________.

Question 7 options:

a)	total assets; total reserves

b)	total liabilities; total assets

c)	total liabilities; total borrowings

d)	total assets; total liabilities

Definition Definition Capital reserves held by banks or financial institutions over and above the reserves that are required to be maintained by the regulator toward its liabilities and for internal controls. For commercial banks, excess reserve is the amount over the standard reserve as decided by the central bank. These excess reserve funds are available in the form of cash and cash equivalents.

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7
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1. In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answer. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. The Bank of Uchenna has the following balance sheet. Assets Liabilities and Equity Reserves $30,000 Demand deposits $100,000 Loans $70,000 Property $2,000 Equity (net worth) $2,000 Assume that the reserve requirement ratio is 20 percent. a. Calculate the dollar value of the reserves that the Bank of Uchenna is required to hold. b. Given the current reserves, calculate the maximum value of additional loans that the Bank of Uchenna can make. c. Assume that Elike raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of Uchenna. By how much does the money supply immediately change as a result of…
11. Macroland has a very simple banking system, in which there is only one chartered bank (The First Bank). The government of Macroland imposes a minimum required reserve ratio of 3%. Individuals in Macroland hold a fixed amount of $1200 in the form cash to facilitate their daily transactions and will deposit any excess amount of money into their bank accounts. The initial balance sheet of the First Bank is as follows: Assets Liabilities & Equity Reserves $255 Chequable deposits $7500 Loans $7400 Shareholder equity $155 Note: Unless otherwise stated, the First Bank will hold the excess reserves fixed at the current level as shown in the initial balance sheet and will lend out any surplus of reserves beyond this. a. Find the required reserves and the excess reserves held by the First Bank. b. Suppose there is a change in money demand such that people increase their cash holdings by $45 by withdrawing cash from their bank accounts. By how much will the money supply change? c. Return to…