T-ACCOUNT FIRST BANK OF CALIFORNIA Assets Liabilities Reserves $ 500 Deposits $50,000 Government bonds/securities $1,000 Loans $ 48,500 TOTAL $50,000 TOTAL $50,000 A) Refer to the table above. If this bank is only holding the minimum amount of reserves to meet the regulations, calculate the reserve requirement ratio for this bank (in %). b) Suppose the Central Bank in this economy conducted an Open Market Sale of $500. What will happen to the First Bank of California's reserves: increase or decrease; and by how much? What would happen to the government bonds owned by this bank: will it increase or decrease, and by how much? c) In practice, an open market purchase operation is not completely controlled by the central bank of any economy. What are the two factors that limit the Central Bank's ability to control total money supply in the economy?

T-ACCOUNT FIRST BANK OF CALIFORNIA Assets Liabilities Reserves $ 500 Deposits $50,000 Government bonds/securities $1,000 Loans $ 48,500 TOTAL $50,000 TOTAL $50,000 A) Refer to the table above. If this bank is only holding the minimum amount of reserves to meet the regulations, calculate the reserve requirement ratio for this bank (in %). b) Suppose the Central Bank in this economy conducted an Open Market Sale of $500. What will happen to the First Bank of California's reserves: increase or decrease; and by how much? What would happen to the government bonds owned by this bank: will it increase or decrease, and by how much? c) In practice, an open market purchase operation is not completely controlled by the central bank of any economy. What are the two factors that limit the Central Bank's ability to control total money supply in the economy?

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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How do you calculate a banks net worth?
Explain what would happen if banks were notified they had to increase their required reserves by one percentage point from, say, 9 to 10 of deposits. What would their options be to come up with the cash?
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?
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Below is the balance sheet for a bank. Under "Other" it has listed "$X" just think of this as the dollar amount needed to make the balance sheet balance. It is not important what that value is for this question. AssetsLiabilitiesReserves 32Deposits 205Loans 150 Securities 53Other $X Using the balance sheet above, find the level of required reserves for this bank if the required reserve ratio = 8%(Give answers to 2 decimal places as needed)
Below is the balance sheet for a bank. Under "Other" it has listed "$X" just think of this as the dollar amount needed to make the balance sheet balance. It is not important what that value is for this question. AssetsLiabilitiesReserves 44Deposits 255Loans 155 Securities 51Other $X Using the balance sheet above, find the level of excess reserves this bank is holding if the required reserve ratio = 6%(Give answers to 2 decimal places as needed)
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John deposits $1,800 into his checking account. If the reserve ratio is 10%, what are the required and excess reserves? Required reserves: $[ Excess reserve erves: $
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The commercial banks are loaned up and have reserves of $600 billion. Now the required reserve ratio is changed from 10% to 5%. Initially, excess reserves will will by $ decrease; 250 decrease; 350 O decrease; 200 increase; 350 increase; 400 increase; 300
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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