The Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $5000 in currency into the bank and that currency is added to reserves. 2a. How much excess reserves does the bank now have? Show your computation. (Recall, to calculate checkable deposits you have to add the original checkable deposits to the new deposit. To calculate required reserves for the deposits, you have to multiply the required reserve ratio (decimal from) by checkable deposits. To calculate excess reserves, you will subtract required reserves from actual reserves.) 2b. Complete the table below for the Third National Bank. Classify the assets and liabilities and net worth. What is the total assets of Third National Bank? The table is in the attachment. 2c. If the required reserve ratio for the Third National Bank is 10 percent, what is the monetary multiplier? (Recall, to calculate you have to use the formula: Monetary Multiplier = 1÷Required Reserve Ratio. The money multiplier is a key measure in banking that helps to predict the money supply that will be available to drive economic growth. As you can see from the formula, if the reserve requirement is 20%, the money multiplier will be 1 divided by 0.2, which is 5. We can then use the money multiplier multiplied by the excess reserves to determine the maximum checkable-deposit creation that will be provided by the new money entering the system.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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question 2.

this question has three parts; 2a, 2b, and 2c.

The Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $5000 in currency into the bank and that currency is added to reserves.

2a. How much excess reserves does the bank now have? Show your computation.
(Recall, to calculate checkable deposits you have to add the original checkable deposits to the new deposit. To calculate required reserves for the deposits, you have to multiply the required reserve ratio (decimal from) by checkable deposits. To calculate excess reserves, you will subtract required reserves from actual reserves.)

2b. Complete the table below for the Third National Bank. Classify the assets and liabilities and net worth. What is the total assets of Third National Bank? The table is in the attachment.

2c. If the required reserve ratio for the Third National Bank is 10 percent, what is the monetary multiplier?
(Recall, to calculate you have to use the formula: Monetary Multiplier = 1÷Required Reserve Ratio. The money multiplier is a key measure in banking that helps to predict the money supply that will be available to drive economic growth. As you can see from the formula, if the reserve requirement is 20%, the money multiplier will be 1 divided by 0.2, which is 5. We can then use the money multiplier multiplied by the excess reserves to determine the maximum checkable-deposit creation that will be provided by the new money entering the system.)

The table provides financial data for the Third National Bank, with all figures represented in thousands of dollars.

- **Assets:**
- Stock Shares: $420
- Reserves: $25
- Property: $300
- Securities: $100
- Loans: $100
- Demand Deposits: $105

The table is divided into two primary categories, "Assets" on the left and "Liabilities and Net Worth" on the right, though specific entries under liabilities and net worth are not shown in this table.

Lines are used to indicate missing data for certain categories, suggesting areas where further details may be required or are unavailable. This layout helps in understanding the bank's financial position, highlighting its assets while leaving liabilities unquantified in this presentation.

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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