Suppose a bank gets $500 million dollars in deposits. The bank can only make loans and keep reserves. The bank gives $300 million in loans. The associated new money creation will be worth $ million O 500 1250 750 350

Suppose a bank gets $500 million dollars in deposits. The bank can only make loans and keep reserves. The bank gives $300 million in loans. The associated new money creation will be worth $ million O 500 1250 750 350

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose a bank gets $500 million dollars in deposits. The bank can only make loans and keep
reserves. The bank gives $300 million in loans. The associated new money creation will be worth
$ ___ million
500
1250
750
350

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a). Calculate excess reserves when required reserve ratio on demand deposit is 14% and required reserve ratio on time deposit is 3%. b). suppose that required reserve ratios are changed to 16% on demand deposits and 0% on time deposits. Calculate excess reserves c. suppose bank sells 3 million in securities on the open market. Calculate the change in the bank's excess reserves when the required reserve ratio on demand deposits is 14%
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1. What is money? Discuss the characteristics of money as medium of exchange, unit of account, store of value, and means of deferred payment. 2. Define M1 and M2 3. Describe the money multiplier and explain how it works. Give examples for each one.
-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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