Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 4, Problem 9PA
(a)
To determine
The
(b)
To determine
The JPM’s new balance sheet.
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Students have asked these similar questions
12.
A bank has reserves of $40, loans of $110, deposits of $90, and owners’ equity of
$60. Which of the following represents the bank’s total assets?
$180
$110
$130
$150
Use the information given in Upper Midwest National Bank's balance sheet to answer the following questions.
Assets
Reserves
Loans
Securities
Bank's Balance Sheet
$150
$600
Liabilities and Owners' Equity
$1,200
Deposits
Debt
$750 Capital (owners' equity)
Suppose a new customer adds $100 to his account at Upper Midwest National Bank, which the owners of the bank then use to make $100 worth of
new loans. This would increase the loans account and
the
account.
$200
This would also bring the leverage ratio from its initial value of
The riskiness of each asset
$100
The total value of liabilities
Which of the following do bankers consider when deciding how to allocate their assets? Check all that apply.
The size of the monetary base
to a new value of
Assets
Liabilities and Equity
Reserves $5,000
Demand deposits $20,000
Business loans $10,000
Student loans $8,000
Government securities $2,000
Equity (Net worth) $5,000
Total assets $25,000
Total liabilities and equity $25,000
The following is a balance sheet for Smith Bank. Assume a 10% reserve requirement.
A. Calculate a 10% reserve requirement
B. Calculate the maximum amount of additional loans that Smith Bank can make without selling its holdings of government securities.
C. Assuming that Smith Bank and other banks now lend out all excess reserves, calculate the maximum possible change in the following:
i. Demand deposits throughout the banking system
ii. Total reserves throughout the banking system
D. Suppose that the country's central bank purchases $1,000 of Smith Bank's holdings of government securities as part of its open market operations. Do…
Knowledge Booster
Similar questions
- Explain why the money listed under assets on a bank balance sheet may not actually be in the bank?arrow_forwardA bank has deposits of 400. It holds reserves of 50. It has purchased government bonds worth 70. It has made loans of 500. Set up a T-account balance sheet for the bank, with assets and liabilities, and calculate the banks net worth.arrow_forwardExplain the difference between how you would characterize bank deposits and loans as assets and liabilities on your own personal balance sheet and how a bank would characterize deposits and loans as assets and liabilities on its balance sheet.arrow_forward
- The Oxnard City Bank has deposits of $800 million. It has reserves of $80 million and $300 million government bonds. The Oxnard City bank also owns $750 million loans. What is the value of the Oxnard City Bank’s total liabilities in millions?arrow_forwardSuppose a bank has $15 million in savings deposits, $7 million in checking deposits, $27 million in total deposits, and $9 million in debts. The bank is also holding $12 million in reserves, $4 million in short term government bonds, $16 million in securities, $2 million in loans. What is the bank’s net worth? Is the bank healthy or not?arrow_forwardPart 2 - Practice- Use the balance sheet for Leon’s Bank below to answer the following questions. Assets Liabilitis Required reserves $1,000 Demand deposits $10,000 Excess reserves $0 Owner’s equity $10,000 Customer loans $8,000 Government securities (bonds) $7,000 Building and fixtures $4,000 1. Calculate the required reserve ratio. Explain how you got your answer. 2. Suppose that an individual deposits $5,000 of cash into her checking account. What is the immediate effect of the cash deposit on the M1 measure of the money supply? Explain. 3. What is the dollar value of the bank’s required reserves after the $5,000 deposit in question #7? Explain. 4. What is the dollar value of the bank’s excess reserves after the $5,000 deposit in question #7? Explain. 5. Calculate the maximum amount that the money supply can change as a result of the $5,000 deposit in question #7. Show your work.arrow_forward
- Use the information given in North Central National Bank's balance sheet to answer the following questions. Bank's Balance Sheet Assets Liabilities and Owners' Equity Reserves $200 Deposits $1,600 Loans $800 Debt $250 Securities $1,000 Capital (owners' equity) $150 Suppose a new customer adds $100 to his account at North Central National Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and account. the This would also bring the leverage ratio from its initial value of to a new value of Which of the following do bankers consider when deciding how to allocate their assets? Check all that apply. The size of the monetary base The return on each asset The total value of liabilitiesarrow_forwardStealth bank has deposits of $300 million. It holds reserves of $20 million and has purchased government bonds worth $300 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank’s net worth equal? a. $1.22 billion b. $920 million c. $620 million d. $20 millionarrow_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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