Suppose the Texans Bank has total deposit of $2,755, and the required reserve ratio of 7 percent. The current total reserve for the bank is $461. If the bank lend out all its excess reserve. What is the potential money supply creation in this banking system? [Hint: enter your answer in 2 decimal places] ed 3,830.71 margin of error +/- 0.01 ver

Suppose the Texans Bank has total deposit of $2,755, and the required reserve ratio of 7 percent. The current total reserve for the bank is $461. If the bank lend out all its excess reserve. What is the potential money supply creation in this banking system? [Hint: enter your answer in 2 decimal places] ed 3,830.71 margin of error +/- 0.01 ver

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Suppose that in 2018 customers deposit $4,000 into their bank accounts. Based on the extended money multiplier calculated in part (1), calculate the total amount which the money supply in the banking system will eventually increase to. Show all steps involved in the calculation. part 1 answer DRR = Ratio (4% or 0.04) CDR = % of money in wallets (3% or 0.03) = (1 + 0.03) / (0.04 + 0.03) = 1.03 / 0.07 Answer = 14.71 Therefor Every $1 in the bank will allow the bank to create $14.71
Please do not use hand writing Q3. Assume that a bank has on its asset side reserves of 1000 and loans of 6000 and on its liability side deposits of 7000. Assume that the required reserve ratio is 10 percent. 1) How much is the bank required to hold as reserves given its deposits of 7000? 2) How much are its excess reserves? 3) By how much can the bank increase its loans?
2. Here is the balance sheet of the consolidated banking system of the country of Zargadee (all entries are in millions): Consolidated Balance Sheet of the Entire Economy of Zargadee Assets Reserves Cash in Vault Deposits at CBZ Bonds Loans 50 90 Total Reserves Total Assets 140 460 1000 1600 Liabilities Deposits Borrowing from CBZ Total Liabilities 1400 200 1600 Assume that 1) households hold no currency and 2) banks hold no excess reserves. The current reserve requirement is 10%. The Central Bank of Zargadee (CBZ) uses the three traditional tools to perform monetary policy in an economy that is reserve constrained. a. Under our assumptions, what is the money multiplier? For each part (b)-(d) below, i) Conceptually explain the effect of the policy on the money supply. ii) Calculate the change in M1 given our assumptions. iii) Construct the new balance sheet of the consolidated banking system of Zargadee under the new policy. iv) When the money supply changes, list a chain of events to…
Suppose in the economy of Apple Republic, the demand for money is given by Md = $Y (0.3 - i), where $Y = 100 and the supply of money (Ms) is $20. a. What is the equilibrium interest rate (i)? Answer: i = [ Select ] v %. b. If the central bank increases money supply (Ms) to $25, what is the impact on the interest rate? Answer: Interest rate (i) will [ Select ] to [ Select ] %.
18. Refer to Table 13.2. The required reserve ratio is 20%. If the First Charter Bank ismeeting its reserve requirement and has no excess reserves, its loans equal:a) $710b) $460c) $550d) $760
A commercial bank has actual reserves of $66,000 and checkable-deposit liabilities of $33,000, and the required reserve ratio is 5%. This bank can loan out $ at the moment. Vour AncIwer:
11. Please answer the table only. The columns specifically.
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6. One of the banking innovations in the 1960s was the payment of interest on certain types of demand deposits. Assume that interest is paid on money at the nominal rate Rm, which equals (R − x), where x is the nominal return on bonds, which is exogenously determined by market structures and the cost of servicing deposits. (i) Use Baumol’s transactions demand model to derive the demand function for money. (ii) Generalizing the above demand function to md(y, R, x), shows the behavior of the LM curve for shifts in x and P. (iii) What is the effect of an increase in x on aggregate demand, output and price level in the neoclassical model? (iv) Assuming that both R and x always increase by the expected rate of inﬂation, do (ii) and (iii) again.
Balance sheet of Bank National Assets Liabilities Vault Cash $1,500 Deposit in Fed $ 500 Loans $4,000 Total Assets $6,000 Deposits $6,000 Total Liabilities $6,000 (1) If r = 10%, how much can the whole banking system expand the money supply? a. $20,000 b. $54,000 c. $40,000 d. $11,000 e. $5,000 (2) If the Fed changed the reserve requirement from 10% to 5% - the bank’s Excess Reserves (ER) would: a. Increase by $300 b. Increase by $1700 c. Decrease by $1400 d. Decrease by $2000 e. Increase by $5700 (3) If the Fed changed the reserve requirement from 10% to 25% the money supply (MS) in the whole banking system could: a. Decrease by $18000 b. Decrease by $54000 c. Increase by $18000 d. Decrease by $36000 e. Increase by $36000 (4) If the Fed changed the reserve requirement from 10% to 39% Bank National would now have ER of: a. -$340 b. -$3,660 c. -$2,340 d. -$500 e. -$250
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7. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Hubert, a client of First Main Street Bank, deposits $500,000 into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Liabilities 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 Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 500,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Eileen, who immediately uses the funds to write a check to Clancy. Clancy…