7. For this table, assume that all banks observe the same desired reserve ratio. Also assume that the banks are listed in sequential order (thus the loans from the First National Bank become the deposits for the Second National Bank, and the loans from the Second National Bank become the deposits for the Third National Bank, and so on). Also, the bank's balance sheets must always be balanced. Table: Multiple Deposit Expansion First National Bank ASSETS Required reserves Loons TOTAL $368.000 Second National Bank ASSETS Required reserves Loans TOTAL Third National Bank ASSETS Required reserves Loons TOTAL O 8% O 20% LIABILITIES Deposits $400,000 TOTAL LIABILITIES Deposits TOTAL LIABILITIES Deposits TOTAL Refer to the table. For the multiple deposit expansion process described in this table, what is the reserve ratio in this banking system? O 92% 10%

7. For this table, assume that all banks observe the same desired reserve ratio. Also assume that the banks are listed in sequential order (thus the loans from the First National Bank become the deposits for the Second National Bank, and the loans from the Second National Bank become the deposits for the Third National Bank, and so on). Also, the bank's balance sheets must always be balanced. Table: Multiple Deposit Expansion First National Bank ASSETS Required reserves Loons TOTAL $368.000 Second National Bank ASSETS Required reserves Loans TOTAL Third National Bank ASSETS Required reserves Loons TOTAL O 8% O 20% LIABILITIES Deposits $400,000 TOTAL LIABILITIES Deposits TOTAL LIABILITIES Deposits TOTAL Refer to the table. For the multiple deposit expansion process described in this table, what is the reserve ratio in this banking system? O 92% 10%

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 3.4P

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13. Suppose that the T-account for Nan Bank Inc. is as follows:Assets LiabilitiesReserves $100,000Loans $400,000 Deposits $500,000If the Bank of Canada requires banks to hold 5 percent of deposits asreserves, how much in excess reserves does Nan Bank Inc. now hold?Assume that all other banks hold only the required amount of reserves. IfNan Bank Inc. decides to reduce its reserves to only the required amount, byhow much would the economy's money supply increase?
2. Assume the reserve requirement forya banking system is 20%. Under the typical assumptions corresponding with the money multiplfer, if an autonomous injection of $10,000 is made, how will it affect: (a) The initial required reserves of the individual bank into which this deposit is made? (b) The initial excess reserves of the individual bank into which this deposit is made? (c) Total deposits in the entire banking system after all of the repercussions of this injection?. (d) Are there any factors that might not allow this to work in the real world in the way economic theory might suggest? If so, what are they?
16. Suppose that the Federal Reserve conducts an open market operation in which it purchases $100 in US Treasury bonds from a private saver. (a) In an economy without banks, by how much, in dollar terms, will the total money supply increase as a result of this open market operation? (b) In an economy with banks in which all members of the nonbank public immedi- ately deposit all of the currency they receive, but in which all banks engage in 100 percent reserve banking, by how much will the total money supply increase as a result of this open market operation? (c) In an economy with banks, in which all banks choose a 10% reserve ratio and in which all members of the nonbank public immediately deposit all of the currency they receive, by how much will the total money supply increase as a result of this open market operation? (d) In an economy with banks, in which all banks choose a 10% reserve ratio, but in which all members of the nonbank public hold 50% of the funds they receive as…
Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate the amount of cash in Bank A, carefully following all numeric instructions.
Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate this economy's monetary base, carefully following all numeric instructions.
Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate the "real-world multiplier," carefully following all numeric instructions.
Table 29-6. Reserves Loans O $106,000 O $60,000 O $72,000 Assets O $50,200 Bank of Springfield $19,200 228,000 Refer to Table 29-6. Assume the Fed's reserve requirement is 6 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 6 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase? Deposits Liabilities $240,000
3. Suppose that Serendipity Bank has excess reserves of $8,000 and checkable deposits of $150,000. If the reserve ratio is 20 percent, what is the size of the bank's actual reserves? 4. The Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $5000 in currency into the bank and that currency is added to reserves. What level of excess reserves does the bank now have?
1. Suppose that the reserve requirement against deposits is 0%, but that cautious banks voluntarily hold 5% of their deposits in reserve, just in case and that people hold no currency-all money is held in the form of checking deposits. a. Suppose that the Federal Reserve purchases $30,000 worth of government bonds from Ellen (a private citizen), and that Ellen deposits all of the proceeds from the sale into her checking account at Z Bank. Construct a balance sheet, with assets on the left and liabilities on the right, to show how Ellen's deposit creates new assets and liabilities for Z Bank. b. How much of this new deposit can Z Bank lend out? Assume that it lends this amount to George, who then deposits the entire amount into his account at Y Bank. Show this on Y Bank's balance sheet. c. How much of this new deposit can Y Bank lend out? Suppose Joe takes out a loan for this amount from Y Bank and deposits the money into his account at X Bank. Show this on X Bank's balance sheet. d.…
Consider an open market purchase of 7 billionTL by Central Bank of Republic of Turkey (CBRT). Assuming required reserve ratio 10%, the commercial bank from which bank central bank buys securities does not want to hold excess reserves, and people does not wish to hold currency, Your answer: O The simple deposit expansion multiplieras 10. O M1 rises by 70billionTL. O The monetary base expands by 7billionTL. O The increase in deposits in the banking system is 70billionTL.
Suppose there is an upswing in the economy with a large demand for finance to invest by the residential and non-residential building sector such that lending by all banks increases by $250 billion. On the assumption the reserve (or liquidity) ratio of banks is 12% this expansion in economic activity will result in an endogenous increase of O $20 billion of reserves and $230 billion of bank deposit money O $34.1 billion of reserves and $284.1 billion of bank deposit money O $20 billion of reserves and $270 billion of bank deposit money O $26.2 billion of reserves and $276.2 billion of bank deposit money
In 2007-08, the financial crisis led money multiplier to and the money supply to which would cause the excess reserves ratio to and depositors are likely to their holdings of currency. O decrease; decrease: increase; increase O increase; increase; decrease; decrease: decrease; increase; decrease: increase; O increase; decrease; increase; decrease; « Previous Next Quiz saved at 9:26am Submit Quiz