EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 9780100605930
Author: Blinder
Publisher: YUZU
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Question
Chapter 29, Problem 7DQ
To determine
Government intervention to take over a failed bank with liabilities.
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What is a bank? What are its functions in our economy?
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If 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?
Chapter 29 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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Similar questions
- Describe how a bank would characterize loans and bank deposits on its balance sheet. Compare that to how you would characterize the same on your personal balance sheet.arrow_forwardYour 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_forwardWould the maximum loan that a bank can make be different when receiving a discount loan from the Federal Reserve of $1 million versus receiving a checking account deposit of $1 million? Explain why or why not.arrow_forward
- Explain each of the following types of deposit accounts: a.demand deposit b.certificate of deposit c.money market demand accountarrow_forwardWould the maximum amount of new bank loans that a commercial bank can make be different when receiving a discount loan from the central bank of $1 million versus receiving a deposit of $1 million? Explain why or why not. Thanks.arrow_forwardHow much money does the average American have in the bank?arrow_forward
- A depositor decides to transfer $3,000 from a checking account to a savings account. Create a balance sheet for the bank and show how the balance sheet will be affected due to this change. Only list the changes on your balance sheet. Then explain what will happen to the M1 and M2 money supplies.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_forwardWhich government agency is responsible for handling bank failure? Describe the methods that the government uses to intervene in the case of a bank failure. If you were a major depositor with about $400,000 of deposits at a failed bank, which method would prefer for the government to use? Explain whyarrow_forward
- During recessions, banks typically chose to hold more excess reserves relative to their deposits. What did this action cause?arrow_forwardWhat other alternatives do depositors have to bank deposits and how could that affect the bank’s ability to keep rates low?arrow_forwardCoin Bank has deposits of $350 million. It holds reserves of $30 million and government bonds worth $70 million. If the bank sells its loans at market value of $400 million, what will its total assets equal? $500 million $750 million $450 million $380 millionarrow_forward
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