Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 4, Problem 3QQ
To determine
The system of fractional reserve banking.
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Suppose the reserve requirement is currently 10%.
a Assume First Bank has deposits of $90 Million. Calculate the reserves for First Bank.
$_______________ million.
b. At the end of the day, First bank has $8 million of reserves. Will be a borrower or lender in the federal funds market?
First bank will __________________ reserves of $____________ million in the federal funds market.
An increase in the interest paid on excess reserves will encourage banks to hold _______ excess reserves and make _______ loans.
a. more; more
b. less; fewer
c. more; fewer
d. less; more
Handwritten calculation otherwise will dislike
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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.arrow_forwardThe First National Bank has $100million in chequable deposits. The desired reserve ratio is 6%. (i) Calculate the Bank's reserves. Round your answer to two decimal places. (ii) The Bank desires to invest $30million in Treasury bills. The Treasury bills are currently trading at $4986.7 (including brokerage fee). How many Treasury bills does the Bank purchase? Round your answer to the nearest whole number. (iii) The Bank makes commercial loans of $25millions and lends $39.3million in mortgages. Calculate the amount of bank capital. (iv) Complete the balance sheet of the Bank. (v) Assume that there is a shortfall of reserves because depositors withdraw $5million from the Bank. Show the new balance sheet of the Bank. What can the Bank do to eliminate the shortfall of reserves?arrow_forwardEconomics According to the Simple Deposit creation model if the Fed conducts an open market sale of $400 million then the money supply will _______________ by __________________; assuming that the required reserve ratio is 10%. Fill in the statement and show the following word: a) Illustrate impact on T-accounts of the Banking System and the FED b) State the exact change in R and MB [give # and directional change: rise of fall] c) Calculate the impact on Money Supply using the simple model (show work). [obtain # and state the directional change: rise of fall]arrow_forward
- Only typed answer and please answer correctlyarrow_forwardOnly typed answer and please don't use chatgpt otherwise I downvote the answerarrow_forwardIf the Reserve Bank of Australia sells financial securities, this: a. decreases bank reserves, increases interest rates, and discourages banks to make more loans. b. decreases bank reserves, increases interest rates, and encourages banks to make more loans. c. increases bank reserves, causes banks to increase their loans, and increases interest rates. d. increases reserves, causes banks to reduce their loans, and decreases interest ratesarrow_forward
- 24. Which of these consumer activities is most influenced by the Federal Reserve? E. applying for a home mortgage G. purchasing discount airline tickets H. using doctor-prescribed medications J. reading nutritional labels on foodsarrow_forwardBALANCE SHEET OF BANK A (S IN MILLIONS) ASSETS LIABILITIES and NET WORTH Reserves (Cash/Reserves at Fed) 550 Demand Deposits $100 Losns 20 Govt. Securities 90 Net Worth (Owners' Equity) What is the net worth of this bank? 2. If the required reserve is 10%, what is the amount of REQUIRED RESERVES that this bank must bold? 3. What then is the mount of EXCESS RESERVES that this bank is now holding? How much does this bank have available for NEW LOANS? 5. If the required reserve is increased to 20%, whal is the amount of REQUIRED RESERVES that this bank must bold?arrow_forwardTyped answer please. I ll rate accordingly.arrow_forward
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