If the Federal Reserve raises the reserve requirement Oa, this would increase the money supply and stimulate the economy O b. this would decrease the money supply and dampen the economy O c. this would have no effect on the economy as it is simply a banking operation O d. this is not something the Federal Reserve can control

If the Federal Reserve raises the reserve requirement Oa, this would increase the money supply and stimulate the economy O b. this would decrease the money supply and dampen the economy O c. this would have no effect on the economy as it is simply a banking operation O d. this is not something the Federal Reserve can control

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Monetary System

Section: Chapter Questions

Problem 10PA

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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. Humongous Bank decides on a policy of holding 100 reserves. Draw a T-account for the bank. Humongous Bank is required to hold 5 of its existing 20 million as reserves, and to loan out the rest. Draw a T-account for the bank after it has made its first round of loans. Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original 19 million loan?
Below is the balance sheet for a bank. Under "Other" it has listed "$X" just think of this as the dollar amount needed to make the balance sheet balance. It is not important what that value is for this question. AssetsLiabilitiesReserves 32Deposits 205Loans 150 Securities 53Other $X Using the balance sheet above, find the level of required reserves for this bank if the required reserve ratio = 8%(Give answers to 2 decimal places as needed)
Below is the balance sheet for a bank. Under "Other" it has listed "$X" just think of this as the dollar amount needed to make the balance sheet balance. It is not important what that value is for this question. AssetsLiabilitiesReserves 44Deposits 255Loans 155 Securities 51Other $X Using the balance sheet above, find the level of excess reserves this bank is holding if the required reserve ratio = 6%(Give answers to 2 decimal places as needed)
In government programs of bank supervision, what is being supervised?
Explain what will happen to the money multiplier process if there is an increase in the reserve requirement?
How do you calculate a banks net worth?
Explain what would happen if banks were notified they had to increase their required reserves by one percentage point from, say, 9 to 10 of deposits. What would their options be to come up with the cash?
Which of the folloving represents a change in today's banking policies that should prevent a recurrence of the bank panics of 1930-1933? O A. banks are more cautious lenders O B. banks keep large amounts of excess reserves on hand O . the FDIC insures bank deposits and therefore depositors do not panic and rush to withdraw money when individual banks have financial problems O D. the President now has the authority to close banks whenever panics occur
1. You deposit $100 of currency into your account. Explain what happens to reserves , checkabledeposits, and monetary base? 2. Explain what the shadow banking system is and how it works. 3. Your bank has the following balance sheet:Assets LiabilitiesReserves $70 million Checkable deposits $200 millionSecurities $50 millionLoans $130 million Bank capital $50 millionIf the required reserve ratio is 10%, what actions should the bank manager take if there is anunexpected deposit outflow of $50 million? Explain your answer. 4. Explain and demonstrate graphically that if the central bank pursues targeting a monetaryaggregate, it is likely to lose control over the interest rate. 5. In the market for reserves, the federal funds rate is equal to the interest rate paid on excessreserves. Explain and demonstrate graphically the effect of an open market sale on the federalfunds rate.
Table 29-3 The First Bank of Roswell Assets Liabilities Reserves $30,000 Deposits $200,000 Loans 170,000 Refer to Table 29-5. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will a. be unable to make any new loans. b. be in a position to make new loans equal to a maximum of $6,000. c. have $4,000 in excess reserves. d. have $64,000 in excess reserves.
Macmillan Learning Suppose you win on a scratch-off lottery ticket and you decide to put all of your $2,500 winnings in the bank. The reserve requirement is 10%. What is the maximum possible increase in the money supply as a result of your bank deposit? maximum increase: S 24750 Incorrect Which events could cause the increase in the money supply to be less than its potential? All money loaned out is deposited back into the banking system. Banks decide to keep some excess reserves on hand. Banks choose to loan out all excess reserves. Some loan recipients choose to hold some cash instead of depositing all of it in banks.
Fed Funds Rate 7.00% 6.50% 6.00% 5.50% 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% $130 $140 $150 $160 Bank Excess Reserves ($Billion) banking system as a Consider the above graph that shows demand for excess reserves by the whole. The discount rate is 4.5 percent and the Fed pays an interest of 1.50 percent on excess reserves. Currently banks as a whole are holding an excess reserve of $70 billion. This means that the equilibrium fed funds rate is percent. percent.. The Fed increases the supply of excess reserves by $20 billion through an open market purchase of bonds. As a result, the equilibrium fed funds changes to percent. The Fed increases the supply of excess reserves by another $30 billion through another round of an open market purchase. As a result the equilibrium fed funds rate changes to