4. Working through an open-market operationAssume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves.AssetsLiabilities and Net Worth(Billions of Dollars)Total reserves5Checkable deposits50Loans25Securities20Total50Total50What is the required reserve ratio?10%O 40%O 5%25%

Required reserve ratio (RRR) = Total Reserves * 100 / Checkable deposits

Answered: 4. Working through an open-market…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Table 14.1: FIRST COMMERCIAL BANK Asset Liabilities Total Reserves: $150,000 $100,000 $1,000,000 $200,000 Deposits Net Worth Required Reserves Excess Reserves ? ? Loans $1,200,000 Total $1,200,000 Total 13. Refer to Table 13. 1. First Commercial bank's excess reserves equal $ a) 150,000 b) 250,000 c) 100,000 d) 50,000
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2
XYZ Corporation is trying to decide whether it should buy money market instruments or leave its funds on deposit at a commercial bank. Which of the following is an advantage of buying money market instruments over leaving funds on deposit at a commercial bank that XYZ should be aware of? a. Money market instruments offer a higher yield than leaving funds on deposit at a commercial bank. b. Money market instruments are more liquid than funds on deposit at a commercial bank. c. Money market instruments are safer than leaving funds on deposit at a commercial bank. d. Money market instruments involve a financial middleman.
Balance sheet of Bank National Assets Liabilities Vault Cash $1,500 Deposit in Fed $ 500 Loans $4,000 Total Assets $6,000 Deposits $6,000 Total Liabilities $6,000 (1) If r = 10%, how much can the whole banking system expand the money supply? a. $20,000 b. $54,000 c. $40,000 d. $11,000 e. $5,000 (2) If the Fed changed the reserve requirement from 10% to 5% - the bank’s Excess Reserves (ER) would: a. Increase by $300 b. Increase by $1700 c. Decrease by $1400 d. Decrease by $2000 e. Increase by $5700 (3) If the Fed changed the reserve requirement from 10% to 25% the money supply (MS) in the whole banking system could: a. Decrease by $18000 b. Decrease by $54000 c. Increase by $18000 d. Decrease by $36000 e. Increase by $36000 (4) If the Fed changed the reserve requirement from 10% to 39% Bank National would now have ER of: a. -$340 b. -$3,660 c. -$2,340 d. -$500 e. -$250
2. Assume that a particular bank has excess reserves of Php800,000 and checkabledeposits of Php1,500,000. If the reserve ratio is 20%, what is the size of the bank’sactual reserves?
Note. Don't use Ai bot
1. The amount of funds that a bank chooses to keep on hand beyond what it is required to is called: excess reserves. excess deposits. federal funds. extra holdings. 2. Suppose Bank Y currently has $300M in demand deposits and $45M in reserves. Bank Xs reserve ratio is 10% 12% 15% None of the above
Suppose that a bank holds $15m in treasury bonds $10m in reserves $30m of checkable deposits $20m of time deposits $6m of capital How much loan does the bank have if we know it doesn't have any other assets or liabilities Suppose that checkable deposits and reserves pay 0 interest The interest rate on treasuries is 3% The loan pays 7% Time deposits pay 5% How much profit does the bank make? What is the bank's return on assets? 3.2% 2.9% 3.7% 2.6%
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…
0 Question 22 (use the Deposit Expansion Multiplier (DEM) formula) Using the Fractional Reserve banking system, if the reserve ratio is 6% and someone deposits $1,000 into his checking account, the banking system potentially can increase the money supply to O $16,750.25 O $16,666.66 $16,100 $16.230.66
Bank of Wealth Balance Sheet Assets Liabilities Demand Deposits $250,000 Required reserves $25,000 Excess reserves $10,000 Total Reserves $35,000 Loans $215,000 Total Assets $250,000 Total Liabilities $250,000 - In the above table, the Bank of Wealth is subject to a required reserve ratio of O 20 percent. O 5 percent. ○ 10 percent. ○ 15 percent.

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