Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
7th Edition
ISBN: 9780134472669
Author: Blanchard
Publisher: PEARSON
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Question
Chapter 6, Problem 7QAP
a.
To determine
To prepare: The bank’s
b.
To determine
To ascertain: The range between the value of the bank’s capital.
c.
To determine
To evaluate: The bank’s capital if the government pays $25 and $45 for troubled assets.
d.
To determine
To construct: The new bank’s balance sheet when the government pays $25 for troubled assets.
e.
To determine
To find: The reason for considering the recapitalization policy better than investing in troubled assets.
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The balance sheet below represents the current financial situation of a commercial bank named Novatia Bank.
Suppose that a 15-year-old takes the $150 cash that she received for her birthday and deposits it in her checking
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Assets
Cash: $650
Property: $1050
What will happen to the bank's liabilities
after the $150 deposit.
Balance Sheet
Deposits increase cash assets, so they
do not affect the liabilities side of a
bank's balance sheet.
The value of checkable deposits will
decrease by $150.
The value of checkable deposits will
increase by $150.
The value of stock shares will decrease
by $150.
The value of stock shares will increase
by $150.
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Stock Shares: $950
Checkable Deposits: $750
What will happen to the bank's assets after
the $150 deposit?
The value of propery holdings will
decrease by $150.
The value of cash holdings will increase
by $150.
The value of cash holdings will decrease
by $150.
Since deposits are a liability, there is no
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If the value of a bank's loan declines, what is the corresponding reduction on the other side of its
balance sheet?
Equity is reduced by the amount of the decline in the value of the loan.
Borrowing from other banks are reduced by the amount of the decline in the value of the loan.
Deposits are reduced by the amount of the decline in the value of the loan.
Cash is reduced by the amount of the decline in the value of the loan.
Stealth bank holds deposits of $593million. It holds reserves of $30 million and government bonds worth $80 million. The current market value of the bank's loans is $400 million. What is the value of the bank’s total liabilities? (Put your answer in terms of millions. If you think it should be 550 million, then write 550 not 550,000,000)
Chapter 6 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
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