None [Related to Solved Problem 13.1] Suppose that Bank of America pays a 3% annual interest rate on checking account balances whilehaving to meet a reserve requirement of 10%. Assume that the Fed pays Bank of America an interest rate of 0.35% on its holdings ofreserves and that Bank of America can earn 7% on its loans and other investments.How do reserve requirements affect the amount that Bank of America can earn on $1,000 in checking account deposits? Ignore anycosts Bank of America incurs on the deposits other than the interest it pays to depositors.The 10% reserve requirement reduces the amount Bank of America can earn on $1,000 by $(Enter your answer rounded to twodecimal places.)

This problem pertains to the determination of opportunity cost. Opportunity cost is the potential…

Answered: [Related to Solved Problem 13.1]…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.3P

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Similar questions

Why do we call a bank a financial intermediary?
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?
How do you calculate a banks net worth?
1.13 Read the following extract and answer the question that follows. Yes, SANParks can refuse to take your cash, says the Reserve BankAt the start of September, South African National Parks (SANParks) will stop accepting cash payments at theentrances, and inside, some of its parks, a policy to be implemented across every national park during 2023.And that is quite alright, says the SA Reserve Bank, as custodian of the rules intended to manage the currency.SanParks announced its roadmap for going cash free – both for the convenience of visitors and for reasons ofsafety – on Wednesday.Source: https://www.businessinsider.co.za/sanparks-is-legally-allowed-to-refuse-cash-reserve-bank-says-2021-8Accessed: 23/08/21The impact of the above decisions by SANParks will have its impact on…a) …the M1 measure of money.b) …the M2 measure of money.c) …the M3 measure of money.d) …the number of notes and coins in circulation in the economy.
1.13 Read the following extract and answer the question that follows. Yes, SANParks can refuse to take your cash, says the Reserve Bank At the start of September, South African National Parks (SANParks) will stop accepting cash payments at the entrances, and inside, some of its parks, a policy to be implemented across every national park during 2023. And that is quite alright, says the SA Reserve Bank, as custodian of the rules intended to manage the currency. SanParks announced its roadmap for going cash free – both for the convenience of visitors and for reasons of safety – on Wednesday. Source: https://www.businessinsider.co.za/sanparks-is-legally-allowed-to-refuse-cash-reserve-bank-says-2021-8 Accessed: 23/08/21 The impact of the above decisions by SANParks will have its impact on... a) ..the M1 measure of money. b) ..the M2 measure of money. c) ..the M3 measure of money. d) ..the number of notes and coins in circulation in the economy.
8. What is the difference between the Federal Reserve Banks' purchases of securities from the commercial banking system and those from the public? Answer the following. Assume that the commercial banks are "loaned up." Purchases of bonds by the Fed from commercial banks ( increase, decrease ) actual reserves and excess reserves of the commercial banks by the full amount of the bond purchase. Purchases of bonds by the Fed from the public ( increase, decrease ) actual reserves, but also ( increase, decrease ) checkable deposits. Some of the checkable deposits must be kept as legal reserves, so the commercial banking system has fewer excess reserves to lend out. Despite this difference the end result is the same amount of increase in the money supply. For example, if the Fed buys a $1000 bond from commercial banks, the banks have $1000 in excess reserves to lend. If the reserve ratio is 20%, then the commercial banks can increase the money supply by $ deposits is created. The bank can…
10. Consider the following situation in the Canadian banking system: • The Bank of Canada purchases $5 million worth of government securities from an investment dealer with a cheque drawn on the Bank of Canada. • The dealer deposits this cheque at Bank XYZ, a commercial bank. • The target reserve ratio for all commercial banks is 20%. • All commercial banks operate with no excess reserves. • There is no cash drain. The maximum creation of new deposits by the banking system, including the dealer's original deposit at Bank XYZ, is $25 million. $15 million. $22.5 million. $5 million. $20 million.
FORUM DESCRIPTION IS CRYPTOCURRENCY MONEY, WILL IT INSTRUCTION: You are required to post an original comment and also respond to at least two other comments to agree/clarify/disagree BECOME MONEY, & WHAT MAY BE THE EFFECT OF CENTRAL BANK DIGITAL CURRENCY ON PRIVATE CRYPTOS? In your post, give us one reason, based on definition of money, for or against adopting cryptocurrency as money, exactly like the dollar. Also, given that we do not use cryptocurrency to pay for grocery in almost all countries and territories, give two key reasons why it has not been widely accepted as money. What is the effect of central bank cryptocurrency (like digital dollar or Yuan) on your previous answer?
Assume that the Bank of Ecoville has the following balance sheet and the Fed has a 10% reserve requirement in place: Balance Sheet for Ecoville International Bank ASSETS LIABILITIES Cash $33,000 Demand Deposits $99,000 Loans 66,000 Now assume that the Fed lowers the reserve requirement to 8%. What is the maximum amount of new loans that this bank can make? Assume that the bank makes these loans. What will the new balance sheet look like? By how much has the money supply increased or decreased? If the money multiplier is 5, how much money will ultimately be created by this event?
Total reserves that a bank has at the Fed are $14 million. Currently the bank has excess reserves of $5 million and has made loans of $100 million. The Fed's reserve requirement for the bank is 6%. What is the maximum deposit level (in $ millions) the bank can expand to by utilizing its excess reserves? [Input your answer rounded to 1 decimal places. Just input the numerical value. You do not need to put the $ symbol or "millions" in your answer.]
Consider the following scenario for a bank. It has $200 in reserves, $800 in loans, $400 in securities, $1200 in deposits, and S100 in debt. a) Calculate the bank's capital. b) Calculate the bank's leverage ratio. c) Suppose there is a stock market boom, so that the bank's assets increase by 2 percent. What is the percentage change in the bank's capital? What is the change in the bank's capital in dollars? d) Suppose that, instead of stock market boom, some borrowers default on their debt so that the bank's assets decrease by 2 percent. How much is now the bank's capital?
Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 20%. Charles, a Southeast Mutual Bank customer, deposits $1,500,000 into his checking account at the local branch. Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans). Assets Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves (Dollars) (Dollars) 1,500,000 Liabilities Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Ana, who immediately uses the funds to write a check to Yakov. Yakov deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls Fergo Bank lends out all of…

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