Suppose the economy's entire money supply equals checkable deposits in the amount of $1,600,000 held in First Main Street Bank. The required reserve ratio is 5% with no excess reserves and no cash leakage. Reserves Loans First Main Street Bank's balance sheet Assets Liabilities $80,000 Checkable Deposits $1,520,000 Suppose the Fed sells $7,500 worth of government securities to First Main Street Bank. Reserves Complete the following table to reflect the Fed's sale on the balance sheet for First Main Street Bank. Assets Liabilities Loans $1,600,000 Checkable Deposits Based on its balance sheet, how can you characterise First Main Street Bank? The bank has $7,500 in excess reserves. The bank has zero excess reserves. The bank is reserve deficient. The bank has $76,000 in excess reserves.
Suppose the economy's entire money supply equals checkable deposits in the amount of $1,600,000 held in First Main Street Bank. The required reserve ratio is 5% with no excess reserves and no cash leakage. Reserves Loans First Main Street Bank's balance sheet Assets Liabilities $80,000 Checkable Deposits $1,520,000 Suppose the Fed sells $7,500 worth of government securities to First Main Street Bank. Reserves Complete the following table to reflect the Fed's sale on the balance sheet for First Main Street Bank. Assets Liabilities Loans $1,600,000 Checkable Deposits Based on its balance sheet, how can you characterise First Main Street Bank? The bank has $7,500 in excess reserves. The bank has zero excess reserves. The bank is reserve deficient. The bank has $76,000 in excess reserves.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Economic
Transcribed Image Text:1. Open-Market Sale
Reserves
Loans
Suppose the economy's entire money supply equals checkable deposits in the amount of $1,600,000 held in First Main Street Bank. The required
reserve ratio is 5% with no excess reserves and no cash leakage.
2. Bank's Choice
Reserves
Loans
3. Money Supply
Contraction
Process
First Main Street Bank's balance sheet
Assets
Liabilities
$1,520,000
Suppose the Fed sells $7,500 worth of government securities to First Main Street Bank.
Assets
$80,000 Checkable Deposits $1,600,000
Complete the following table to reflect the Fed's sale on the balance sheet for First Main Street Bank.
Liabilities
STEP: 1 of 3
Checkable Deposits
Based on its balance sheet, how can you characterise First Main Street Bank?
The bank has $7,500 in excess reserves.
The bank has zero excess reserves.
The bank is reserve deficient.
The bank has $76,000 in excess reserves.
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