If the required reserve ratio is 10 percent and the Fed buys a $5,000 security from a depository institution, the money supply a. decreases by $50,000. b. decreases by $15,000. c. decreases by $10,000. d. increases by $15,000. Oe. increases by $10,000.
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- Humongous Bank is the only bank in the economy. The people in this economy have 20 million in money, and they deposit all their money in Humongous Bank. Humongous Bank decides on a policy of holding 100 reserves. Draw a T-account for the bank. Humongous Bank is required to hold 5 of its existing 20 million as reserves, and to loan out the rest. Draw a T-account for the bank after it has made its first round of loans. Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original 19 million loan?If the required reserve ratio is 10 percent and the Fed buys a $5,000 security from a depository institution, the money supply. a. decreases by $50,000. b. decreases by $15,000. c. decreases by $10,000. d. increases by $15,000. Oe. increases by $10,000.If the required reserve ratio is 25 percent and the Fed buys a $20,000 security from a depository institution that currently has no excess reserves, the maximum change in money supply in the economy is: A. - $20.000. B. $5.000. C. $20.000. D. $80,000. E. - $80.000
- A bank receives a demand deposit of $3,200. The bank loans out $2,456 of this deposit and increases its excess reserves by $200. What is the reserve requirement? A. 6.25 percent B. 15 percent C. 20 percent D. 17 percent E. 23. 25 percent1. Assume the Standard Toy Company negotiates a loan for $5,000 from the Metro Bank and receives a demand deposit for that amount in exchange for its promissory note (IOU). As a result of this single transaction: 1. the supply of money declines by the amount of the loan. 2. a claim has been "demonetized." 3. the Metro Bank acquires reserves from other banks. 4. the supply of money is increased by $5,000.If the Reserve Bank of Australia sells financial securities, this: a. decreases bank reserves, increases interest rates, and discourages banks to make more loans. b. decreases bank reserves, increases interest rates, and encourages banks to make more loans. c. increases bank reserves, causes banks to increase their loans, and increases interest rates. d. increases reserves, causes banks to reduce their loans, and decreases interest rates
- Humongous Bank is the only bank in the economy.The people in this economy have $20 million in money,and they deposit all their money in Humongous Bank.a. Humongous Bank decides on a policy of holding100% reserves. Draw a T-account for the bank.b. Humongous Bank is required to hold 5% of itsexisting $20 million as reserves, and to loan outthe rest. Draw a T-account for the bank after ithas made its first round of loans.c. Assume that Humongous bank is part of amultibank system. How much will money supplyincrease with that original $19 million loan?If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank A. must increase its required reserves by $10. B. will initially see its total reserves increase by $10.50. C. will be able to make new loans up to a maximum of $9.50. D. All of the above are correct.Initially a bank has a required réserve ratio of 20 percent and no excess reserves. If $5,000 is deposited into the bank, theninitially. ceteris paribus, A . Required reserves will increase by $5,000.B .This bank can increase its loans by S5,000C .This bank can increase its loans by $4,000.D .Total reserves will increase by $4,000.
- If the reserve ratio is 14 and the central bankincreases the quantity of reserves in the bankingsystem by $120, the money supply increases bya. $90.b. $150.c. $160.d. $480.a. Assume that all the money is held as a deposit while banks keep 10% of the deposit as a reserve. Estimate the money multiplier and money supply in the economy. b. Assume that the public is holding 40% of their assets as currency while depositing the remaining in banks, while banks keep 10% of deposit as a reserve. Estimate the money multiplier and money supply in the economy.a. Distinguish between legally required reserves and excess reserves. b. Why don’t banks hold a 100 percent reserves? How is the amount of reserves bank hold related to the amount of money the banking system creates? c. Define the term money multiplier? d. Assume that Lucky Bank is required to hold a 10% deposits as reserves, and there is a $3000 increase in demand deposits. Calculate the money multiplier? How much additional new demand deposits couldthe $3,000 deposit support?
