Explain how banks have the ability to create money by assuming Bank A takes in a $10,000 deposit. (Make up your own numbers as needed.) In part a, what was the reserve to deposit ratio used? How does the size of the reserve to deposit ratio affect how much money a bank can create out of a $10,000 deposit?

Need help with this question. Thank you   4.  If the Required Reserve Ratio (RRR) is 1/10, all banks except one have no excess reserves to start with, one bank has $10,000 in initial excess reserves, what is the maximum amount by which the banking system as a whole may increase the money supply (assuming all excess reserves are lent out (this is a money multiplier question)?

5. 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 5%. Larry, a client of First Main Street Bank, deposits $200,000 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 5%. 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) 200,000

Big bucks bank Assets                                                                               Liabilities Total reserves  $30mm                                              demand deposits $190mm Loans                   $100mm Bonds                   $100mm                                                                                       Stockholder equity   $40 mm   Suppose the required reserve ratio is 10%. What is the maximum amount of money Big buck bank can create?  If the reserve ratio is increased to 14%, what is the maximum amount of money BBB can create? 3 If the reserve ratio is still at 10% and BBB chose to buy bonds instead of making loans with its excess reserves,  what is the maximum amount of money BBB can create? a) From question #1 & #3, if the prospective Loans and Bonds both paid interest of 6.8%, which strategy would be more profitable for BBB?  b) If BBB decided to pursue #1 as a strategy, what is the maximum money making potential of the banking…

Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original loan of $19 million (show your work)?

The economy of Elmendyn contains 900 $1 bills. If people hold all money as currency, the quantity of money is   .   If people hold all money as demand deposits and banks maintain 100 percent reserves, the quantity of money is   .   If people hold equal amounts of currency and demand deposits and banks maintain 100 percent reserves, the quantity of money is   .   If people hold all money as demand deposits and banks maintain a reserve ratio of 12.5 percent, the quantity of money is   .   If people hold equal amounts of currency and demand deposits and banks maintain a reserve ratio of 12.5 percent, the quantity of money is   .

What is the role of a clearinghouse under free banking? List at least two, describing each in one or two sentences. Now consider: Bank A has $30 of Bank B's currency. B has $50 of Bank C's currency. And C has $10 of Bank A. Give an example of the efficiency gains in reserves by using a clearinghouse. Assume that B redeems A then C redeems B, then A redeems C.

Despite the fact that personal possession of currency is not allowed by U.S. prisons, in reality, incarcerated people still exchange goods and services. Until 2003, the year in which the U.S. government banned smoking in federal penitentiaries, cigarettes were the preferred medium of exchange among prisoners. A main difference between using cigarettes and using dollars as money is that have intrinsic value. U.S. dollars are an example of money.

Helen deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of her deposit, Bank A can make a maximum loan of ____ .  Checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to _____ .     Select one: a. $10,000 , $100,000.   b. $2,000 , $10,000. c. $8,000 , $50,000. d. $50,000 , $100,000. e. $9,000 , $40,000.

Suppose all banks have zero excess reserves. The Fed buys bonds for $1 million and a bond dealer deposits the check in his or her bank. The required reserve ratio is 8 percent. The bank loans out the maximum it is allowed to a local business. The business writes a check for the full amount for supplies, which is then deposited in another bank. The largest loan the second bank can make is: The largest loan the second bank can make is $. (Round your answer to the nearest dollar.)