QUESTION 33LAST CHANCE BANK OF TOMBSTONEASSETScash in the vault:deposits at FedUS treasury bonds:loans:Building:TOTALS:QUESTION 34---BALANCE SHEETe) lends money to banksLIABILITIES &$900,000 demand deposits:$100,000$300,000$3,700,000$2,000,000$7,000,000capital stock:TOTALS:33. Assume a required reserve ratio of 10%, banks do not wish to hold excess reserves, and the public does not wish to increase its cash holdings. The maximum amount of new money the banking system can create is:O a) $400,000O b) $500,000c) $900,000d) $4,000,000e) $5,000,00034. When the Federal Reserve Bank wants to reduce the quantity of money in circulation, itO a) sells government securitiesb) buys government securitiesc) increases taxesO d) decreases taxesNET WORTH$5,000,000$2,000,000$7,000,000

QUESTION 33 LAST CHANCE BANK OF TOMBSTONE ASSETS cash in the vault: deposits at Fed US treasury bonds: loans: Building: TOTALS: --- BALANCE SHEET LIABILITIES & $900,000 demand deposits: $100,000 $300,000 $3,700,000 $2,000,000 capital stock: $7,000,000 TOTALS: NET WORTH $5,000,000 $2,000,000 $7,000,000 33. Assume a required reserve ratio of 10%, banks do not wish to hold excess reserves, and the public does not wish Oa) $400,000 Ob) $500,000 O c) $900,000 O d) $4,000,000 Oe) $5,000,000 increase its cash holdings. The maximum amount of new money the banking system can create is:

QUESTION 33 LAST CHANCE BANK OF TOMBSTONE ASSETS cash in the vault: deposits at Fed US treasury bonds: loans: Building: TOTALS: --- BALANCE SHEET LIABILITIES & $900,000 demand deposits: $100,000 $300,000 $3,700,000 $2,000,000 capital stock: $7,000,000 TOTALS: NET WORTH $5,000,000 $2,000,000 $7,000,000 33. Assume a required reserve ratio of 10%, banks do not wish to hold excess reserves, and the public does not wish Oa) $400,000 Ob) $500,000 O c) $900,000 O d) $4,000,000 Oe) $5,000,000 increase its cash holdings. The maximum amount of new money the banking system can create is:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Problem 3 The current Discount Rate is 0.5%. The current Federal Funds Rate is 0.5%. The interest paid on Excess Reserves is 0.25%. Nonborrowed Reserves are $3.848tn. a) Using this information, carefully construct a channel system graph of the current market for Nonborrowed Reserves. b) What is happening to the Federal Funds Rate? c) Why do you think this is?
Question 3 (a) Distinguish between legally required reserves and excess reserves. (b) Why don’t banks hold a100 percent reserves? How is the amount of reserves bank hold related to the amount of money the banking system creates? Assume that Lucky Bank is required to hold a10% deposits as reserves, and there is a $3000 increase in demand deposits. Calculate the money multiplier? How much additional new demand deposits could the $3,000 deposit support?
3. Money held by the public that includes demand deposits is measured as (A) M1 (B) M2 (C) MO (D) Fiat money (E) Commodity money
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9. Bank leverage Use the information presented in Midwestern Mutual Bank's balance sheet to answer the following questions. Bank's Balance Sheet Assets Liabilities and Owners' Equity Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities $750 Capital (owners' equity) $100 Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and the account. This would also bring the leverage ratio from its initial value of to a new value of Which of the following is true of the capital requirement? Check all that apply. Its intended goal is to protect the interests of the depositors. Its intended goal is to protect the interests of those who hold equity in the bank. It specifies a minimum leverage ratio for all banks.
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6. Required and excess reserves Suppose that Second Republic Bank currently has $200,000 in demand deposits and $130,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Second Republic Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)
-The Golden State Bank has total cash reserves of $110,000, deposits of $200,000, and loans of $90,000. The reserve requirement is 5 percent. This bank can make additional loans up to the amount of: $10,000 $5,500 $100,000 $190,000
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If $2,000 is withdrawn from the bank by a customer, the bank's Assets and liabilities decrease Assets rise Liabilities decrease and assets rise Assets decrease and liabilities rise
Table 1 below shows the different categories of money that make up Country A’s money supply. See image attached. 1. Calculate the value of M1 2. Calculate the value of M2 3. Calculate the value of long term deposits include M3 4. Which one of the components of M3 is the largest?