Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 13, Problem 10WNG
To determine
The change in money supply.
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You 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
%24
Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the
bank. The reserve requirement is 5%.
How much maximum of new money will be created (maximum amount of new checking deposits created
by the banking system) as a result of your bank deposit? Hint: do not count your initial deposit as part of
increase.
Number
$70000
☐ ☐
Incorrect.
The bank can only loan out excess reserves. Calculate the
excess reserves after the lottery winnings were deposited,
than multiple that number by the money multiplier.
Which events could cause the increase in the money supply to be less than its potential?
Check all that apply.
Some loan recipients choose to hold some cash instead of
depositing all of it in banks.
All money loaned out is deposited back into the banking
system.
Banks decide to keep some excess reserves on hand.
Banks choose to loan out all excess reserves.
Say that First Commercial Bank has reserves of $100, loans at $400 and
checkable deposits of $500. The required reserve ratio is 10%. If the bank
has a deposit outflow of $40, is the bank in violation of the required
reserve ratio? What is the maximum amount of deposit outflow the bank
can sustain without violating the ratio?
Chapter 13 Solutions
Macroeconomics
Ch. 13.1 - Prob. 1STCh. 13.1 - Prob. 2STCh. 13.1 - Prob. 3STCh. 13.3 - Prob. 1STCh. 13.3 - Prob. 2STCh. 13.3 - Prob. 3STCh. 13.3 - Prob. 4STCh. 13 - Prob. 1QPCh. 13 - Prob. 2QPCh. 13 - Prob. 3QP
Ch. 13 - Prob. 4QPCh. 13 - Prob. 5QPCh. 13 - Prob. 6QPCh. 13 - Prob. 7QPCh. 13 - Prob. 8QPCh. 13 - Prob. 9QPCh. 13 - Prob. 10QPCh. 13 - Prob. 11QPCh. 13 - Prob. 12QPCh. 13 - Prob. 1WNGCh. 13 - Prob. 2WNGCh. 13 - Prob. 3WNGCh. 13 - Prob. 4WNGCh. 13 - Prob. 5WNGCh. 13 - Prob. 6WNGCh. 13 - Prob. 7WNGCh. 13 - Prob. 8WNGCh. 13 - Prob. 9WNGCh. 13 - Prob. 10WNG
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- Suppose the reserve requirement is 19%, banks hold no excess reserves, and there are no additional currency holdings. For each of the following scenarios, find the change in deposits, reserves, and loans for each bank. Instructions: Round your answers to two decimal places. a. Mickey receives his paycheck of $2,400 for the week and deposits the check at First Bank. Use the table below to show the change in assets and liabilities at First Bank resulting from this transaction. Assets Change in Reserves: $ Change in Loans: $ b. Suppose that Austin gets a loan from First Bank in the amount from the "Loans" cell in the table in part a, and uses it to buy some Jewelry from Jenny. Jenny takes the money from Austin and deposits it at Second Bank. Use the table below to show the change in assets and liabilities at Second Bank resulting from this transaction. Assets Change in Reserves: $ Change in Loans: $ Liabilities Change in Deposits: $ Assets Change in Reserves: $ Change in Loans: $…arrow_forwardJana withdraws $1,200 in cash from her checking account. If the reserve requirement is 0%, but banks keep 7% of their checking deposits as excess reserves, what will be the change in the money supply as a result of Jana's withdrawal?arrow_forwardSuppose the Federal Reserve's trading desk buys $500,000 in T-bills from a securities dealer, who then deposits the Fed's check in Best National Bank. Assuming that the required reserve ratio is 20%, complete the following table by showing changes in Best National Bank's balance sheet. Best National Bank Assets (Dollars) Reserves: Addendum: Changes in Reserves Actual reserves Required reserves Excess reserves Liabilities (Dollars) Checking deposits: Total liabilities Consider the money multiplier. The maximum increase in the money supply that can result from this open market transaction isarrow_forward
- Suppose again that checkable deposits started off at $400,000 in First Main Street Bank, the required reserve ratio is 15%, and no excess reserves and no cash leakage exist. You know from the previous step that, due to the sale of securities by the Fed, the money supply in the economy contracted from $400,000 to $392,000. But the contraction of the money supply does not stop with First Main Street Bank. It moves to other banks. The loan repayment that Charles made to First Main Street Bank was written on a check Second Republic Bank issued. Then, when the check cleared, the reserves of Second Republic Bank declined, and Second Republic Bank found itself reserve deficient as well. It applied loan repayments to its reserve deficiency position. The effect continued with other banks and so on. The initial removal of funds in the amount of $8,000 will cause the money supply to contract by $______. Therefore, the money supply is $______. (Hint: round the results of your calculations to the…arrow_forwardAssume the required reserve ratio is 10% and the Open Market Committee of the FED sells $100 billion in bonds to the public. Assuming banks give out as many loans as possible, what is the total change in the money supply? If the M1 was originally $7500 billion, what is the new M1 ( After the change)You must show your work.arrow_forwardIf the required reserve ratio (RRR) in U.S. is 10 percent and you deposit $5,000, which is wired from your parents’ bank account in Germany to your checking account in the U.S. National Bank, then the change in the U.S. money supply eventually should be Group of answer choices a $45,000 increase. a $5,000 increase. no change. a $50,000 increase.arrow_forward
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