ECNS 202 PRINTOUT
8th Edition
ISBN: 9781337096584
Author: Mankiw
Publisher: CENGAGE L
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Question
Chapter 16, Problem 6CQQ
To determine
The impact of the behavior of banks and people in fractional reserve banking.
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If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank
A. must increase its required reserves by $10.
B. will initially see its total reserves increase by $10.50.
C. will be able to make new loans up to a maximum of $9.50.
D. All of the above are correct.
Suppose you win on a scratch-off lottery ticket and you decide to put all of your $2,500 winnings in the bank. The reserve
requirement is 10%.
What is the maximum possible increase in the money supply as a result of your bank deposit?
maximum increase: $
Which events could cause the increase in the money supply to be less than its potential?
All money loaned out is deposited back into the banking system.
Banks choose to loan out all excess reserves.
SEL
Some loan recipients choose to hold some cash instead of depositing all of it in banks.
Banks decide to keep some excess reserves on hand.
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Chapter 16 Solutions
ECNS 202 PRINTOUT
Ch. 16.1 - Prob. 1QQCh. 16.2 - Prob. 2QQCh. 16.3 - Prob. 3QQCh. 16.4 - Prob. 4QQCh. 16 - Prob. 1CQQCh. 16 - Prob. 2CQQCh. 16 - Prob. 3CQQCh. 16 - Prob. 4CQQCh. 16 - Prob. 5CQQCh. 16 - Prob. 6CQQ
Ch. 16 - Prob. 1QRCh. 16 - Prob. 2QRCh. 16 - Prob. 3QRCh. 16 - Prob. 4QRCh. 16 - Prob. 5QRCh. 16 - Prob. 6QRCh. 16 - Prob. 7QRCh. 16 - Prob. 8QRCh. 16 - Prob. 9QRCh. 16 - Prob. 10QRCh. 16 - Prob. 1PACh. 16 - Prob. 2PACh. 16 - Prob. 3PACh. 16 - Prob. 4PACh. 16 - Prob. 5PACh. 16 - Prob. 6PACh. 16 - Prob. 7PACh. 16 - Prob. 8PACh. 16 - Prob. 9PACh. 16 - Prob. 10PACh. 16 - Prob. 11PACh. 16 - Prob. 12PA
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- Explain how to use the discount rate to expand the money supply.arrow_forwardWhich of the following represents an action by the central bank designed to decrease the money supply? Select one: a. a decrease in the required reserve ratio O b. buying government securities an increase in the discount rate C. d. a increase in tax ratesarrow_forwardIII. 1. If excess reserves are zero and the BSP increases the required reserve ratio from 5 percent to 10 percent, then the money multiplier (increases, decreases) _________ from __ to ___ and money supply (increases, decreases) __________ 2. If the required reserve ratio is 8 percent, commercial banks do not hold excess reserves, and people do not hold currency, then when the Central Bank purchases $20 million of government bonds, bank reserves of commercial banks (increase, decrease________ by _________ and the money supply eventually (increases, decreases) ________ by ______. 3. If the reserve ratio is 15 percent, and commercial banks do not hold excess reserves, and people hold only demand deposits and no currency, then when the Central Bank sells $65 million worth of bonds to the public, commercial bank reserves (increase, decrease) _____ by _______ and the money supply eventually (increases, decreases) _______by _______. 4. A decrease in the discount rate will (increase,…arrow_forward
- Explain the THREE (3) types of demand for money.arrow_forwardi need the answer quicklyarrow_forwardThe banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change? a) It falls by $12 billion. b) It falls by $19 billion. c) It falls by $21 billion. d) It rises by $19 billion.arrow_forward
- XYZ bank has $500 of reserves, $500 of loans and $1000 of deposits. Let's suppose that the required reserve ratio is 10%. How much could the bank make in additional loans right now? How much will be the excess reserves? How much could the bank make in additional loans right now? How much will the money supply increase after the money creation process is finished?arrow_forwardAsaparrow_forwardThe government of a small country imposes a minimum reserve ratio of 7%. If a bank within this country receives a deposit of $130,000, then: Select one: a. $9,100 should be lent out to customers and $120,900 should be held by the bank b. $120,900 should be lent out to customers and $9,100 should be held by the bank c. None of the answers are correct d. $130,000 should be fully lent to customers at 7% $130,000 should be fully lent to customers at 7% $130,000 should be fully lent to customers at 7% e. $130,000 should be held by the bankarrow_forward
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