Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 13, Problem 9E
To determine
To write:
A directive issued to the Federal reserve on selecting a
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Students have asked these similar questions
Describe why some banks maintain a relationship with a correspondent bank.
64. What does it mean when a currency is "fractionally backed"?
Banks have many more claims outstanding against them than they have reserves available to pay those claims.
The currency is partially backed by the nation's supply of gold.
Banks maintain a fixed fraction of their outstanding deposits as cash deposits with the central bank.
All paper currency is convertible to gold.
A bank's currency is fractionally backed by its supply of gold.
The First National Bank of Townville has $125,000 in U.S. government securities,
$200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at
the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its
reserves? Show your calculations.
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