Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 28, Problem 2SCQ
Given the danger of bank runs, why do banks not keep the majority of deposits on hand to meet the
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Given the danger of bank runs, why do banks not keep the majority of deposits on hand to meet the demands of depositors?
How would a rise in interest rate affect a bank’s profit?
Banks don't lend out all of the funds deposited because:
A)
they need to make more money on interest-bearing deposits.
B)
they need to reduce their liquidity position.
C)
it would not be profitable.
D)
they have to satisfy any depositor who wants to withdraw funds.
Chapter 28 Solutions
Principles of Economics 2e
Ch. 28 - Why is it important for the members of the Board...Ch. 28 - Given the danger of bank runs, why do banks not...Ch. 28 - Bank runs are often described as self-fulfilling...Ch. 28 - If the central bank sells 500 in bonds to a bank...Ch. 28 - What would be the effect of increasing the banks...Ch. 28 - Why does contractionary monetary policy cause...Ch. 28 - Why does expansionary monetary policy causes...Ch. 28 - Why might banks want to hold excess reserves in...Ch. 28 - Why might the velocity of money change...Ch. 28 - How is a central bank different from a typical...
Ch. 28 - List the three traditional tools that a central...Ch. 28 - How is bank regulation linked to the conduct of...Ch. 28 - What is a bank run?Ch. 28 - In a program of deposit insurance as it is...Ch. 28 - In government programs of bank supervision, what...Ch. 28 - What is the lender of last resort?Ch. 28 - Name and briefly describe the responsibilities of...Ch. 28 - Explain how to use an open market operation to...Ch. 28 - Explain how to use the reserve requirement to...Ch. 28 - Explain how to use the discount rate to expand the...Ch. 28 - How do the expansionary and contractionary...Ch. 28 - How do tight and loose monetary policy affect...Ch. 28 - How do expansionary, tight, contractionary, and...Ch. 28 - Which kind of monetary policy would you expect in...Ch. 28 - Explain how to use quantitative easing to...Ch. 28 - Which kind of monetary policy would you expect in...Ch. 28 - How might each of the following factors complicate...Ch. 28 - Define the velocity of the moneyCh. 28 - What is the basic quantity equation of money?Ch. 28 - How does a monetary policy of inflation target...Ch. 28 - Why do presidents typically reappoint Chairs of...Ch. 28 - In what ways might monetary policy be superior to...Ch. 28 - The term moral hazard describes increases in risky...Ch. 28 - Explain what would happen if banks were notified...Ch. 28 - A well-known economic model called the Phillips...Ch. 28 - How does rule-based monetary policy differ from...Ch. 28 - Is it preferable for central banks to primarily...Ch. 28 - Suppose the Fed conducts an open market purchase...Ch. 28 - Suppose the Fed conducts an open market sale by...Ch. 28 - All other things being equal, by how much will...Ch. 28 - Suppose now that economists expect the velocity of...Ch. 28 - If GDP is 1,500 and the money supply is 400, what...Ch. 28 - If GDP now rises to 1,600, but the money supply...Ch. 28 - If GDP now falls back to 1,500 and the money...
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Similar questions
- What was the problem that created bank runs?arrow_forwardIf federal deposit insurance is provided to banks at no cost to them, who pays when an insured depository institution fails and its depositors are reimbursed for the full amount of their deposits?arrow_forwardWhat are the effective strategies to make the rural bank capable to pay-off a short and longterm loan so it can finance the bank for its plans of expansion?arrow_forward
- What is the risk if a bank does not diversify its loans?arrow_forwardIf a customer came into the bank to withdraw more from their demand deposits than the bank currently has on hand in vault cash, what are the sources for getting the cash to cover the withdraws(Check ALL That Apply)? Print New Money Borrow from another Bank Borrow from the Federal Reserve Convert(Liquidate) Loansarrow_forwardHow can a central bank acting as a lender of last resort stop a bank panic?arrow_forward
- Your friend Sarah borrows money from her bank to buy a car. Explain to her the transactions in which the bank sets up the loan, and why the loan involves an increase in the money supply.arrow_forwardwhat happens is the central bank decreases the money supply?arrow_forwardA bank almost always insists that the firms it lends tokeep compensating balances at the bank. Why?arrow_forward
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