EBK ECONOMICS
13th Edition
ISBN: 8220106798607
Author: Arnold
Publisher: CENGAGE L
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Chapter 12, Problem 8WNG
To determine
The
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John deposits $1,600 into his checking account. If the reserve ratio is 5%, what are the
required and excess reserves?
Required reserves: $
Excess reserves: $
Draw a simple T-account for First National Bank of Me, which has $9000 of deposits, a reserve ratio of 10 percent, and excess reserves of $300.
John deposits $3,000 into his checking account. If the reserve ratio is 15%, what are the required and excess reserves?
Required reserves: $ Excess reserves: $ keep a portion of it and lend out the rest. keep every penny as vault cash since it
is such a small amount. lend out every penny since almost all transactions are digital.
Chapter 12 Solutions
EBK ECONOMICS
Ch. 12.2 - Prob. 1STCh. 12.2 - Prob. 2STCh. 12.2 - Prob. 3STCh. 12.3 - Prob. 1STCh. 12.3 - Prob. 2STCh. 12.3 - Prob. 3STCh. 12.4 - Prob. 1STCh. 12.4 - Prob. 2STCh. 12.4 - Prob. 3STCh. 12 - How much money did you make last year? What is...
Ch. 12 - Prob. 2QPCh. 12 - Prob. 3QPCh. 12 - Prob. 4QPCh. 12 - Prob. 5QPCh. 12 - Prob. 6QPCh. 12 - Prob. 7QPCh. 12 - Prob. 8QPCh. 12 - Prob. 9QPCh. 12 - Prob. 10QPCh. 12 - Prob. 11QPCh. 12 - Prob. 12QPCh. 12 - Prob. 13QPCh. 12 - Prob. 14QPCh. 12 - Prob. 15QPCh. 12 - Prob. 16QPCh. 12 - Prob. 17QPCh. 12 - Prob. 1WNGCh. 12 - Prob. 2WNGCh. 12 - Prob. 3WNGCh. 12 - Prob. 4WNGCh. 12 - Prob. 5WNGCh. 12 - Prob. 6WNGCh. 12 - Prob. 7WNGCh. 12 - Prob. 8WNGCh. 12 - Prob. 9WNGCh. 12 - Prob. 10WNG
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- Distinguish between legally required reserves and excess reserves.arrow_forwardIf you deposit $40 into a checking account, and your bank has a 10% reserve requirement, the bank's excess reserves will rise by $arrow_forwardYou just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 20%, how much will your deposit increase the total value of checkable bank deposits? If the reserve requirement is 8%, how much will your deposit increase the total value of checkable deposits? Increasing the reserve requirement decreases the money supply. %24 %24arrow_forward
- If I own Hawkins Savings and Loan, and a customers makes a $8,000 deposit, what is the total amount I am able to lend if the reserve requirement is 15%?arrow_forwardJohn 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: $arrow_forwardDoes the fact that your bank keeps only a fraction of your account balance in reserve worry you? Why don't people rush off to the bank and retrieve their money? What would happen if they did?arrow_forward
- Does the fact that your bank keeps only a fraction of your account balance in reserve make you uncomfortable? Why don’t people rush to the bank and retrieve their money? What would happen if they did?arrow_forwardAssuming that the cash held by the public drops to $5,000,000 with and equal amount becoming excess reserves and the required reserves ratio drops to 12 percentarrow_forwardA bank's checkable deposits are $960, its loans are $857 and the bank has reserves of $103. If the bank faces a required reserve ratio of 9%, then what are the bank's current excess reserves?arrow_forward
- What entity decides what the reserve requirement is? arrow_forwardWhat is the risk if a bank does not diversify its loans?arrow_forwardExcess reserves are insurance from deposit outflow. Suppose you hold 15 million required reserves and 45 million excess reserves at the central bank. The total interest payment on reserves from the central bank is 0.3%. If you do not hold your excess reserves at the bank, you may take loans and earn 4% in average. What is the cost of holding excess reserve at the central bank?arrow_forward
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