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ssume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets (Billions of Dollars) Total reserves 10 Checkable deposits 25 5 10 25 Loans Securities Total What is the required reserve ratio? 5% 40% Liabilities and Net Worth 10% 25% Total 25 Suppose that the Federal Reserve (the "Fed") sells $3 million of bonds to a bond dealer, who pays the Fed by writing a check against the funds in her checking account. What is the initial impact of this transaction? Checkable deposits fail by $3 million, and the banking system's holdings of securities fall by $3 million. Checkable deposits fall by $3 million, and the banking system's total reserves fall by $3 million. The banking system's holdings of securities fall by $3 million, and the banking system's total reserves rise by $3 million.

ssume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets (Billions of Dollars) Total reserves 10 Checkable deposits 25 5 10 25 Loans Securities Total What is the required reserve ratio? 5% 40% Liabilities and Net Worth 10% 25% Total 25 Suppose that the Federal Reserve (the "Fed") sells $3 million of bonds to a bond dealer, who pays the Fed by writing a check against the funds in her checking account. What is the initial impact of this transaction? Checkable deposits fail by $3 million, and the banking system's holdings of securities fall by $3 million. Checkable deposits fall by $3 million, and the banking system's total reserves fall by $3 million. The banking system's holdings of securities fall by $3 million, and the banking system's total reserves rise by $3 million.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1st drop down options
- decrease
-increase
2nd drop down options
-7.5 million
-3 million
-5 million
-18.75 million

 

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4. Working through an open-market operation Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets (Billions of Dollars) Total reserves 10 Checkable deposits 25 Loans 5 Securities 10 Total 25 What is the required reserve ratio? 5% Liabilities and Net Worth 40% 10% 25% Total: 25 Suppose that the Federal Reserve (the "Fed") sells $3 million of bonds to a bond dealer, who pays the Fed by writing a check against the funds in her checking account. What is the initial impact of this transaction? Checkable deposits fail by $3 million, and the banking system's holdings of securities fall by $3 million. Checkable deposits fall by $3 million, and the banking system's total reserves fall by $3 million. The banking system's holdings of securities fall by $3 million, and the banking system's total reserves rise by $3 million. The banking system's holdings of securities rise by $3 million, and the banking system's total reserves fall by $3 million.
Transcribed Image Text:4. Working through an open-market operation Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets (Billions of Dollars) Total reserves 10 Checkable deposits 25 Loans 5 Securities 10 Total 25 What is the required reserve ratio? 5% Liabilities and Net Worth 40% 10% 25% Total: 25 Suppose that the Federal Reserve (the "Fed") sells $3 million of bonds to a bond dealer, who pays the Fed by writing a check against the funds in her checking account. What is the initial impact of this transaction? Checkable deposits fail by $3 million, and the banking system's holdings of securities fall by $3 million. Checkable deposits fall by $3 million, and the banking system's total reserves fall by $3 million. The banking system's holdings of securities fall by $3 million, and the banking system's total reserves rise by $3 million. The banking system's holdings of securities rise by $3 million, and the banking system's total reserves fall by $3 million.
The banking system's holdings of securities rise by $3 million, and the banking system's total reserves fall by $3 million. As a result of the Fed's sale of $3 million of securities, checkable deposits in the banking system can potentially by as much as
Transcribed Image Text:The banking system's holdings of securities rise by $3 million, and the banking system's total reserves fall by $3 million. As a result of the Fed's sale of $3 million of securities, checkable deposits in the banking system can potentially by as much as
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