2)Assume the banking system has $100 billion in demand deposits and $10 billion in reserves. In addition, assume that the required reserve ratio is 5%. Answer the following questions: a) How much excess reserves are in this system? b) What is the value of the money multiplier? c) What is the maximum amount of change in demand deposit creation that could take place if the banking system lent out all of its excess reserves.

2)Assume the banking system has $100 billion in demand deposits and $10 billion in reserves. In addition, assume that the required reserve ratio is 5%. Answer the following questions: a) How much excess reserves are in this system? b) What is the value of the money multiplier? c) What is the maximum amount of change in demand deposit creation that could take place if the banking system lent out all of its excess reserves.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter27: Money And Banking

Section: Chapter Questions

Problem 31P: Humongous Bank is the only bank in the economy. The people in this economy have 20 million in money,...

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Assume the banking system has $200 billion in demand deposits and $80 billion in reserves. In addition, assume that the required reserve ratio is 25%. Answer the following questionsa. a)How much excess reserves are in this system? b)What is the value of the money multiplier? c)How much of money supply will be created if the banking system lent out all of its excess reserves?
11) Which of the following increases the quantity of money? A) an individual's cash withdrawal from a bank B) an individual's purchase of a government security from the Fed C) the Fed's purchase of a government security D) an increase in the government's budget deficit 12) Open market purchases by the Federal Reserve System (the Fed) A) raise the federal funds rate. B) increase bank reserves. C) occur when the Fed wants to decrease the quantity of money. D) All of the above answers are correct. 13) When the Fed raises the federal funds rate, A) net exports increase. B) the value of the dollar falls on the foreign exchange market. C) the value of the dollar rises on the foreign exchange market. D) consumption increases. 14) If the Fed raises the federal funds rate so that the exchange rate rises, then imports ________ and exports ________. A) increase; increase B) increase; decrease C) decrease; increase D)…
11 . Let there be $100 new deposit in a bank. a) Calculate the money multiplier for a reserve requirement ratio of 20% for five iterations. Identify the total money created, the total required reserves, and the total excess reserves. b) Assume the currency to deposit ratio is 10%. Recalculate the money multiplier from the previous question a for five iterations. Identify the total money created, the total required reserves, and the total excess reserves. Show your work
Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: a) the money supply by the whole banking system can increase by $1,000. b) the money supply by the whole banking system can increase by $4,000. c) the money supply by the whole banking system can increase by $8,000.
Chapter 16: Reserves = $1,500 First national bank Loaned = $8,500 Chapter 17: Deposits = $10,000 Money Created = Amount x MM 1. If the bank has to maintain a required reeserve ratio of 10% then what is the excess reserve if any? 1/P 2. If the reserve ratio is 10% then what will be money multiplier 3. How much extra money the bank will be able to create with an addtional MS 3/4 # 1/2 0 Total Reserve = Required Reserve + Excess Reserve Money Multiplier = 1/R Where R is Reserve Ratio MD 1. What is the price level at the equilibirum? 2. What is the value of money at the equilibirum? 3. If the velocity is 4, money supply is 100, price level is 10 then what will be the output? MXV=PXY P= Price level Value of Money = 1/P
01. This bank's actual reserves are $_______ 02. Assuming a required reserve ratio of 10%, this bank's requirered reserves are $_______. 3. Assuming a required reserve ratio of 10%, the amount of money that the whole baning system can create is $_____ 4. Assuming a required reserve ratio of 20%, the impact on the quantity of money issued by the whole banking system will be $__________.
Assume the banking system has $200 billion in demand deposits and $80 billion in reserves. In addition, assume that the required reserve ratio is 25%. Answer the following questions: a. How much excess reserves are in this system? b. What is the value of the money multiplier? c. How much of money supply will be created if the banking system lent out all of its excess reserves?
a) Define M1 and M2 using the definition of money supply in Hong Kong. b) Suppose you buy $300,000 ibonds from the Hong Kong government, in which $200,000 are financed by your cash, and $100,000 are paid by writing a cheque. Explain the impact on M1 and M2 using the definition of money supply in Hong Kong. c) Explain in terms of the three functions of money, how cigarettes could be called "money" in prisoner-of-war camps of World War II.
1. A customer puts his money in the amount of 1,500,000 into a bank deposit. If these deposits are kept as bank reserves, then it is known that the bank has a reserve ratio of 5%. What is the total deposit in the banking system? And how much has the money supply increased? 2. A bank with a minimum reserve of 25% has a total bank reserve of 100,000,000 without any excess reserves.a. What is the money multiplier? What is the money supply in circulation?b. The central bank made a new policy in which the required reserves / minimum reserves fell to 20%. What is the impact on bank reserves and the impact on the money supply 3. Show through the diagram the impact of a decrease in the minimum wage on the balance of wages, labor supply, labor demand, and the number of unemployed! Explain! 4. The minimum reserve / reserve requirement set in a country is 20% assuming the bank does not keep excess reserves. The central bank has a goal of expanding the economy by increasing the money supply by 40…
19)Consider the following scenario. The currency deposit ratio is 0.5, the required reserve ratio is 0.25. The bank holds the required reserves, plus a little extra in case of a large withdrawal equal to e(R)=0.5-2R. Where R is the interest rate and it is equal to 12.5. The money supply is £600. Using the money multiplier approach calculate how many pounds worth of bonds would the Bank of England have to buy/sell in order to increase the money supply to £900? a. Sell bonds for an amount equal to $200. b. Buy bonds for an amount equal to $200. c. Buy bonds for an amount equal to $400. d. Sell bonds for an amount equal to $250.
3. Suppose the total reserves (RR+ER) in the banking sector is $5 trillion. The central bank has set the required reserve ratio (rr) at 5%. Assuming that the banks prefer to hold zero excess reserves (ER), answer the following questions. a. Calculate the money multiplier. b. What is the total money supply at the end of the deposit expansion process? c. Calculate what would happen to the money supply if the central bank causes the total reserves to increase by $1 trillion.
I need help on D through H! Please! Suppose the reserve requirement is 8% and a new deposit of $900 billion is made into the banking system. Create T accounts to analyze the following questions. a) Initially, reserves would increase by? $900 Billion b) Required reserves would increase by? $72 billion c) Excess reserves would increase by? $828 billion d) The first round of loans would amount to? e) The second round of loans would amount to approximately? f) For the entire macroeconomy, after the infinite rounds of loans were taken into account, money supply would increase by? g) If the Federal Reserve bought bonds worth $600 billion, money supply would increase by? h) If the Federal Reserve sold bonds worth $600 billion, money supply would decrease by?