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.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter27: Money And Banking

Section: Chapter Questions

Problem 31P: Humongous Bank is the only bank in the economy. The people in this economy have 20 million in money,...

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1. You deposit $100 of currency into your account. Explain what happens to reserves , checkabledeposits, and monetary base? 2. Explain what the shadow banking system is and how it works. 3. Your bank has the following balance sheet:Assets LiabilitiesReserves $70 million Checkable deposits $200 millionSecurities $50 millionLoans $130 million Bank capital $50 millionIf the required reserve ratio is 10%, what actions should the bank manager take if there is anunexpected deposit outflow of $50 million? Explain your answer. 4. Explain and demonstrate graphically that if the central bank pursues targeting a monetaryaggregate, it is likely to lose control over the interest rate. 5. In the market for reserves, the federal funds rate is equal to the interest rate paid on excessreserves. Explain and demonstrate graphically the effect of an open market sale on the federalfunds rate.
05 A bank that has assets of $60 billion and a net worth of $20 billion must have Mc Sraw Hill Multiple Choice excess reserves of $20 billion. O excess reserves of $40 billion. liabilities of $20 billion. liabilities of $40 billion. & V
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The bank you own has the following balance sheet Assets OA. You can go to the discount window. OB. You can call in or sell off loans. OC. You can borrow reserves in the federal funds market OD. Any of the above are appropriate actions to take Liabilities $75 million Reserves Loans Deposits Bank capital $525 million If the bank suffers a deposit outflow of $50 million with a required reserve ratio on deposits of 10%, what actions can you take to keep your bank from failing? $500 million $100 million
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Humongous Bank is the only bank in the economy. The people in this economy have 20 million in money, and they deposit all their money in Humongous Bank. Humongous Bank decides on a policy of holding 100 reserves. Draw a T-account for the bank. Humongous Bank is required to hold 5 of its existing 20 million as reserves, and to loan out the rest. Draw a T-account for the bank after it has made its first round of loans. Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original 19 million loan?
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%
Assume the Continental National Bank's balance statement is as follows:Assets:reserves $40,000loans $25,000securities $110,000Liabilities + net worthcheckable deposits $130,000stock shares $45,000Assuming a legal reserve ratio of 20 percent, how much in excess reserves would this bank have after a check for $10,000 was drawn and cleared against it?$3,000.$24,000.$6,000.$16,000.
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Assume we have a simplified banking system inbalance-sheet equilibrium. Also assume that allbanks are subject to a uniform 10 percent reserverequirement and demand deposits are the onlyform of money. A commercial bank receiving anew demand deposit of $100 would be able toextend new loans in the amount ofa. $10.b. $90.c. $100.d. $1,000.
Your bank has the following balance sheet: Assets Liabilities Checkable Reserves $90 million $380 million deposits $130 Securities million Loans $200 million Bank capital $40 million If the required reserve ratio is 20%, what will be the size of this bank (as measured by its total assets or liabilities) after $20 million deposit outflow if it just meets reserve deficiency by taking out a discount loan from the Federal Reserve? $402 million $400 million. OOOO $420 million. $412 million.