Suppose banks keep no excess reserves and that all banks are currently meeting the reserve requirement. The Federal Reserve then makes an open market purchase of $13,000 from Bank 1. Use the T-account below to show the result of this transaction for Bank 1, assuming Bank 1 keeps no excess reserves after the transaction. (Remember T-accounts show the changes to a bank's balance sheet.) Bank 1's T-account Assets Reserves Liabilities Deposits $ Loans Securities

Suppose banks keep no excess reserves and that all banks are currently meeting the reserve requirement. The Federal Reserve then makes an open market purchase of $13,000 from Bank 1. Use the T-account below to show the result of this transaction for Bank 1, assuming Bank 1 keeps no excess reserves after the transaction. (Remember T-accounts show the changes to a bank's balance sheet.) Bank 1's T-account Assets Reserves Liabilities Deposits $ Loans Securities

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 Federal Reserve and the money supply Suppose the money supply (as measured by checkable deposits) is currently $300 billion. The required reserve ratio is 25%. Banks hold $75 billion in reserves, so there are no excess reserves. The Federal Reserve (“the Fed”) wants to decrease the money supply by $32 billion, to $268 billion. It could do this through open-market operations or by changing the required reserve ratio. Assume for this question that you can use the simple money multiplier. If the Fed wants to decrease the money supply using open-market operations, it should ______(buy/sell) $_________ billion worth of U.S. government bonds. If the Fed wants to decrease the money supply by adjusting the required reserve ratio, it should ______(increase/decrease) the required reserve ratio. THis is one question . please answer with an explanation.
As a result of the Fed's sale of $3,000 worth of government securities to First Main Street Bank, the bank becomes reserve deficient. Suppose that Nick, a First Main Street Bank's customer, re-pays back the $3,000 loan he took out a few months ago. STEP: 2 of 3 Which of the following most accurately describes First Main Street Bank's actions? The bank keeps the $3,000 as reserves. The bank creates a $42,000 loan. The bank keeps the $450 as reserves. The bank creates a $3,000 loan. The money supply in the economy is $
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Homework: Chapter 13 Suppose the economy's entire money supply equals checkable deposits in the amount of $900,000 held in First Main Street Bank. The required reserve ratio is 10% with no excess reserves and no cash leakage. Reserves Loans First Main Street Bank's balance sheet Assets Reserves Loans $810,000 $90,000 Checkable Deposits $900,000 Suppose the Fed sells $3,000 worth of government securities to First Main Street Bank. Complete the following table to reflect the Fed's sale on the balance sheet for First Main Street Bank. Liabilities Assets STEP: 1 of 3 Checkable Deposits O The bank has zero excess reserves. Liabilities Based on its balance sheet, how can you characterise First Main Street Bank? O The bank has $3,000 in excess reserves. O The bank has $81,000 in excess reserves. The bank is reserve deficient.
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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
Suppose the balance sheet of Bigfoot Bank of America is shown below: Assets Liabilities Reserves $100 Deposits $5000 Loans $4900 a) The Reserve Requirement Ratio (RRR) is 0.04 or 4%. What is the Money Multiplier? b) Suppose that Skitch brings in a deposit of $300. What will be the new Deposits, Reserves and Loans amounts immediately after this deposit? Does the bank have any Excess Reserves at this point? How much? Show your work. Deposits = Reserves Loans Excess Reserves = c) What will be the Deposits, Reserves and Loans amounts after the entire money creation process has been completed. Show your work. Deposits = Reserves = Loans =
Suppose the simplified consolidated balance sheet shown below is for the entire commercial banking system and that all figures are in billions of dollars. The reserve ratio is 25 %. Refer to the balance sheet below. Enter your answers as whole numbers. A) What is the amount of excess reserves in this commercial banking system? What is the maximum amount the banking system might lend? Show in columns 1(a) and 1'(a) how the consolidated balance sheet would look after this amount has been lent. What is the size of the monetary multiplier? B) Using the original figures, answer the questions in part A assuming the reserve ratio is 20%. What is the amount of excess reserves in this commercial banking system? What is the maximum amount the banking system might lend? Show in columns 1(b) and 1'(b) how the consolidated balance sheet would look after this amount has been lent. What is the monetary multiplier? What is the resulting difference in the amount that the commercial banking…
Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 10%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited (Dollars) 500,000 Change in Excess Reserves (Dollars) Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Neha, who immediately uses the funds to write a check to Lorenzo. Lorenzo deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls Fergo Bank lends out all of its new excess reserves to Andrew, who writes a check to Teresa, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves to Beth in turn. Fill in the following table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar. Southeast Mutual Bank Walls Fergo Bank PJMorton Bank Increase in Deposits…
The table given below shows the assets and liabilities of the Tenth National Bank, Assume that this is the only bank in the economy. Table 16 Balance Sheet of Tenth National Bank Assets Liabilities Reserves $2,730 Deposits $7,640 Loans $3,300 Total Assets $7,640 Total Liabilities $7,640 Refer to Table 16. If this Bank's depositors withdraw $935, and the Federal Reserves decreases the reserve requirement from 12% to 9%. This bank's excess reserves will change by: O $313.35 O $371.05 O -$554.60 O -$621.65 -$563.95
suppose the required reserve ratio is 11%. How much additional money can BBB lend out at a maximum? suppose the required reserve ratio is lowered to 8%. What is the Maximum amount of additional money that BBB can lend out? Is this different than the maximum amount of new money BBB can create by itself? 3. suppose the required reserve ratio is raised to 15%. What is the maximum amount of additional money BBB can lend out?
Consider the following bank. Cash in Vaults=$25 Its deposits at Central Bank-$275 Loans it has made to customers=$1600 Value of government bonds it owns=$100 Deposits made by its customers=$2000 What are the bank's reserves (in dollars)? (Round to two decimal places and do not enter the currency symbol. If your answer is $6.114, enter 6.11. If your answer is $6.115, enter 6.12. If appropriate, remember to enter the - sign.)