The balance sheet of Nationa Bank is shown below (assume a legal reserve ratio of 10%): Assets Liabilities & Net Worth Reserves 90,000 Checkable Deposits 500,000 Cash 20,000 Stock Shares 270,000 Loans 125,000 Securities 235,000 Property 300,000 1. Based on the balance sheet above, how much money can the bank create? 2. If the bank creates the full amount possible, how much money can the banking system create as a result? 3. If the Federal Reserve raises the reserve ratio to 20%, how much will the bank and ba
The balance sheet of Nationa Bank is shown below (assume a legal reserve ratio of 10%): Assets Liabilities & Net Worth Reserves 90,000 Checkable Deposits 500,000 Cash 20,000 Stock Shares 270,000 Loans 125,000 Securities 235,000 Property 300,000 1. Based on the balance sheet above, how much money can the bank create? 2. If the bank creates the full amount possible, how much money can the banking system create as a result? 3. If the Federal Reserve raises the reserve ratio to 20%, how much will the bank and ba
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 30P: A bank has deposits of 400. It holds reserves of 50. It has purchased government bonds worth 70. It...
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The balance sheet of Nationa Bank is shown below (assume a legal reserve ratio of 10%):
Assets | Liabilities & Net Worth | ||
Reserves | 90,000 | Checkable Deposits | 500,000 |
Cash | 20,000 | Stock Shares | 270,000 |
Loans | 125,000 | ||
Securities | 235,000 | ||
Property | 300,000 |
1. Based on the balance sheet above, how much money can the bank create?
2. If the bank creates the full amount possible, how much money can the banking system create as a result?
3. If the Federal Reserve raises the reserve ratio to 20%, how much will the bank and banking system be able to create based on the new reserve ratio?
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