Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 25, Problem 2.6P
Sub part (a):
To determine
Transaction account of the Bank.
Sub part (b):
To determine
The new T-account of the bank after making maximum possible loan out of the deposit.
Sub part (c):
To determine
The T-accounts for the two banks due to the clearance of check.
Sub part (d):
To determine
The maximum amount of deposits that can be created out of the G's initial deposit.
Sub part (e):
To determine
The maximum loans that can be created out of the initial deposit.
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You just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves
and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round
your answers to the nearest dollar.
If the reserve requirement is 20%, how much will your
deposit increase the total value of checkable bank deposits?
If the reserve requirement is 8%, how much will your deposit
increase the total value of checkable deposits?
Increasing the reserve requirement
decreases
the
money supply.
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suppose that you deposit 8000 in your bank and the required reserve ration is 15 percent the maximum loan your bank can make as a direct result of your deposit is
Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Nick,
a client of First Main Street Bank, deposits $500,000 into his checking account at First Main Street Bank.
Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans).
Assets
Liabilities
Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 10%.
Hint: If the change is negative, be sure to enter the value as negative number.
Amount Deposited
Change in Excess Reserves
Change in Required Reserves
(Dollars)
(Dollars)
(Dollars)
500,000
Chapter 25 Solutions
Principles of Economics (12th Edition)
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