Select TWO true statements about money. a. Base money is equal to cash plus commercial bank reserves with the central bank O b. Cash is a liability of the central bank O c. If a commercial bank makes a loan and credits the borrower's current account, then base money increases I d. Commercial bank reserves with the central bank appear as a liability in their balance sheets

Select TWO true statements about money. a. Base money is equal to cash plus commercial bank reserves with the central bank O b. Cash is a liability of the central bank O c. If a commercial bank makes a loan and credits the borrower's current account, then base money increases I d. Commercial bank reserves with the central bank appear as a liability in their balance sheets

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter13: Money And The Financial System

Section: Chapter Questions

Problem 2.8P

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Assuming an economy have only two commercial banks in it banking system, Classic Bank and Prudent Bank. The following shows the balance sheet of the two banks as at 2019.Classic BankBalance sheet as at December, 2019GHSm GHSmAssets: Liabilities & Equity:Reserves 1,000 Deposits 3,000Securities 2,000 Equity 7,000Loans & Advances 1,000Property, Plant and Equipment 6,000 .10,000 10,000 Prudent BankBalance sheet as at December, 2019GHSm GHSmAssets: Liabilities & Equity:Reserves 600 Deposits 2,500Securities 1,500 Equity 4,400Loans & Advances 800Property, Plant and Equipment 4,000 .6,900 6,900Assume a required reserve ratio of 10%.(a) What is the amount of excess reserves in this commercial banking system? (b)What is the maximum amount that the money supply can be expanded? What would be the effect of a fall in reserve ratio to 5%, on the maximum amount that the money supply can be expanded? (c) Determine the stock of broad money supply assuming the non-bank public holds…
BALANCE 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?
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What are the benefits and costs for a bank when itdecides to increase the amount of its bank capital?
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Humongous Bank is the only bank in the economy.The people in this economy have $20 million in money,and they deposit all their money in Humongous Bank.a. Humongous Bank decides on a policy of holding100% reserves. Draw a T-account for the bank.b. Humongous Bank is required to hold 5% of itsexisting $20 million as reserves, and to loan outthe rest. Draw a T-account for the bank after ithas made its first round of loans.c. Assume that Humongous bank is part of amultibank system. How much will money supplyincrease with that original $19 million loan?
Given a money base of 500 million, RRR of 5% and change in reserves for the banking system of 10 thousand. What is the change in deposit? Select one: a. $50, 000 b. $200, 000 c. None of the above d. $100, 000 If the government wants to increase the money supply they could: Select one: a. Increase the reserve requirement ratio b. Increase the discount rate c. All of the above d. Buy bonds In a monetary union, individual countries cannot do which of the following: Select one: a. Set their own interest rates b. A and C c. Change their own exchange rates d. Set their own tax rates