2. Required and excess reserves Suppose that Best National Bank currently has $100,000 in checkable deposits and $65,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Using these values, fill in the empty cells for reserves, required reserves, and excess reserves in the following table. Best National Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)

2. Required and excess reserves Suppose that Best National Bank currently has $100,000 in checkable deposits and $65,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Using these values, fill in the empty cells for reserves, required reserves, and excess reserves in the following table. Best National Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Hubert, 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 Now, suppose First Main Street Bank loans out all of its new excess reserves to Eileen, who immediately uses the funds to write a check to Clancy. Clancy…
2. Consider the following data (all values are in billions of dollars): (b) Currency Transactional deposits Bank reserves June 1930 June 1931 June 1932 $ 3.681 3.995 4.959 21.612 19.888 15.490 3.227 3.307 2.829 (a) Calculate the values for each period for the currency-deposit ratio, the ratio of total reserves to deposits, the monetary base, M1, and the money multiplier. Can you explain why the currency-deposit ratio and the ratio of total reserves to deposits moved as they did between 1930 and 1932(Great depression era)?
1. If excess reserves are zero and the BSP increases the required reserve ratio from 5 percent to 10 percent, then the money multiplier (increases, decreases) from _ to and money supply (increases, decreases) the required reserve ratio is 8 percent, commercial banks do not hold excess 2. If reserves, and people do not hold currency, then when the Central Bank purchases $20 million of government bonds, bank reserves of commercial banks (increase, and the decrease by money supply eventually (increases, by L. 3. If the reserve ratio is 15 percent, and comme;c:al banks do not hold excess reserves, an, people hold only demand deposits and ro, currency, then when the Central Bank sells $65 million worth of bonds to the public, commercial bank reserves (increase, and the money decreases) decrease) by supply eventually (increases, decreases) 4. A decrease in the discount rate will (increase, decrease) commercial bank borrowings from the central bank, (increase, decrease) commercial bank…
Again we will deal with Economy G, containing Bank One. Bank One has $10,000 cash in its vaults and $8,000 US government bonds, as well as $22,000 Deposit in the Fed. It has $250,000 in checking and $100,000 in savings deposits. It uses our default rr and its residents hold $50,000 in currency (cash). Calculate the maximum amount of new money that Bank One can create, on its own, given this information.
6. Required and excess reserves Suppose that Second Republic Bank currently has $200,000 in demand deposits and $130,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Second Republic Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)
39. Which of the following are ways in which banks can help businesses in the United States? Choose all that apply. Banks can reduce the money supply through the use of the money multiplier. Banks can serve as a stopgap to save struggling businesses from bankruptcy with small loans. Bank loans remove personal liability from company owners. O Bank loans are tax-deductible for businesses.
50. Commercial banks maintain their reserves in the form of cash in their bank vaults and deposits at the Bank of Canada. deposits at other commercial banks that are immediately accessible. cash in their bank vaults. cash and foreign currency at the Bank of Canada. gold in their bank vaults.
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1 t 2 The reserve requirement. Complete the following information and write appropriate title or answers on each line. Assets Required Reserves $60 Excess Reserves _$0 Securities $80 Loans Total Assets 100 Required Reserves Excess Reserves Securities $240 Loans Total Assets 63 2.1 Based on the balance sheet, the initial reserve requirement is 60. 2.2 Suppose the fed lowers the reserve requirement by 0.05. How many dollars of excess reserves does this create? $0 Balance Sheet for Banking System Lrabilities 2.3 What is the additional lending capacity due to the change in the reserve requirement? 2.4 Reconstruct the Balance Sheet for Banking System with changes. New Balance Sheet for Banking System Deposits 80 Deposits 100 Net Worth Total Liabilities and Net Worth $240 Net Worth Total Liabilities and Net Worth $0 $240 2.5 What is the expansion of the Money Supply? 2.6 Loans have gone up by. _$0
4. The combined balance sheet of all the commercial banks in the economy is as follows (in billions of dollars): Assets Liabilities Reserves 25 Deposits 250 Government Securities 75 Loans 150 a) Assume this bank has no excess reserves, what is the reserve requirement? b) If the Fed purchases securities of $25 billion, how much in excess reserves do the banks have immediately after this transaction? c) By how much would the money supply increase if the banks fully utilized their lending capacity capacity and all money lent was redeposited into the banking system? hp
6. Banks hold some deposits on reserve at the Fed because a. These deposits meet the reserve requirements of the Fed. b.The Fed requires every bank to hold at least $100 million on deposit at all times. c.These are membership dues for being a member bank. d. The Fed will insure those deposits, but will not insure regular bank deposits.