ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- 2. Here is the balance sheet of the consolidated banking system of the country of Zargadee (all entries are in millions): Consolidated Balance Sheet of the Entire Economy of Zargadee Assets Reserves Cash in Vault Deposits at CBZ Bonds Loans 50 90 Total Reserves Total Assets 140 460 1000 1600 Liabilities Deposits Borrowing from CBZ Total Liabilities 1400 200 1600 Assume that 1) households hold no currency and 2) banks hold no excess reserves. The current reserve requirement is 10%. The Central Bank of Zargadee (CBZ) uses the three traditional tools to perform monetary policy in an economy that is reserve constrained. a. Under our assumptions, what is the money multiplier? For each part (b)-(d) below, i) Conceptually explain the effect of the policy on the money supply. ii) Calculate the change in M1 given our assumptions. iii) Construct the new balance sheet of the consolidated banking system of Zargadee under the new policy. iv) When the money supply changes, list a chain of events to…arrow_forwardExplain how a bank could optimise its position through managing its use of different financial products.arrow_forwardIf a bank currently has $10,000 Excess Reserves, $20,000 Required Reserves, and $30,000 Actual Reserves. What is the maximum amount of loans the bank could make? Multiple Choice $10,000 - up to its Excess Reserves $20,000 - up to its Required Reserves Under the above conditions, the bank could not make any additional loans $30,000 - up to its Actual Reservesarrow_forward
- How does the Bank of Canada regulate the money supply? Check all that apply. By setting the interest rates on home mortgages and auto loans By setting reserve requirements By buying and selling stocks By buying and selling bonds through open-market operations By setting the banker's deposit ratearrow_forwardOur banking system is called Fractional Reserve Banking because: a) banks are required to hold only a fraction of money deposited in them as reserves b) the banks excess reserves are always a faction of their total reserves c) banks hold money in many denominations d) the money in the banks can disappear in a fraction of a secondarrow_forwardWould the maximum amount of new bank loans that a commercial bank can make be different when receiving a discount loan from the central bank of $1 million versus receiving a deposit of $1 million? Explain why or why not. Thanks.arrow_forward
- explain the sources of funds and uses of bank funds as outline in the banks balance sheet. which one is the most important source of the fund to the bank today and why?arrow_forward22. Which of the following entries would appear on the liabilities side of a commercial bank's balance sheet? Government of Canada securities demand deposits cash reserves mortgage loans foreign currency reservesarrow_forward"Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?arrow_forward
- banks do not have enough reserves to satisfy the reserve requirement, they can borrow additional reserves in True or False True Falsearrow_forwardHow many banks failures occurred in the United States during 2017 What were the total assets and total deposits held by the banks that failed during 2019?arrow_forwardBanks acquire $50 billion in new reserves, and the reserve requirement ratio is 6%. What will be the impact on the total deposits in the system, assuming all excess reserves are loaned to borrowers and the public redeposits all the borrowed funds in the banking system?arrow_forward
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