Initial deposit ($100) The Money Multiplier Process Loan Loan $ University Bank Excess reserves: $25 Required reserves: $75 Deposit Bank #2 Deposit Excess reserves: $6.25 Required reserves: $18.75 Instructions: Round your responses to two decimal places. a. What volume of loans can the banking system in the figure support? Bank #3 Loan Deposit Excess reserves: $1.56 Required reserves: $4.69 Bank #4 etc. Excess reserves: $0.39 Required reserves: $1.17 b. If the reserve requirement were 70 percent rather than 75 percent, what would the system's lending capacity be? $

Initial deposit ($100) The Money Multiplier Process Loan Loan $ University Bank Excess reserves: $25 Required reserves: $75 Deposit Bank #2 Deposit Excess reserves: $6.25 Required reserves: $18.75 Instructions: Round your responses to two decimal places. a. What volume of loans can the banking system in the figure support? Bank #3 Loan Deposit Excess reserves: $1.56 Required reserves: $4.69 Bank #4 etc. Excess reserves: $0.39 Required reserves: $1.17 b. If the reserve requirement were 70 percent rather than 75 percent, what would the system's lending capacity be? $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Part 2 - Practice- Use the balance sheet for Leon’s Bank below to answer the following questions. Assets Liabilitis Required reserves $1,000 Demand deposits $10,000 Excess reserves $0 Owner’s equity $10,000 Customer loans $8,000 Government securities (bonds) $7,000 Building and fixtures $4,000 1. Calculate the required reserve ratio. Explain how you got your answer. 2. Suppose that an individual deposits $5,000 of cash into her checking account. What is the immediate effect of the cash deposit on the M1 measure of the money supply? Explain. 3. What is the dollar value of the bank’s required reserves after the $5,000 deposit in question #7? Explain. 4. What is the dollar value of the bank’s excess reserves after the $5,000 deposit in question #7? Explain. 5. Calculate the maximum amount that the money supply can change as a result of the $5,000 deposit in question #7. Show your work.
The balance sheet of Nationa Bank is shown below (assume a legal reserve ratio of 10%): Assets Liabilities & Net Worth Reserves 90,000 Checkable Deposits 500,000 Cash 20,000 Stock Shares 270,000 Loans 125,000 Securities 235,000 Property 300,000 1. Based on the balance sheet above, how much money can the bank create? 2. If the bank creates the full amount possible, how much money can the banking system create as a result? 3. If the Federal Reserve raises the reserve ratio to 20%, how much will the bank and banking system be able to create based on the new reserve ratio?
Total reserves $55 billion Transactions deposits: $600 billion Cash held by public: $400 billion Bonds held by public: $400 billion Stocks held by public: $140 billion Gross domestic product: $8 trillion Interest rate: 6 percent Required reserve ratio: 0.10 How large is the money supply (M1)? How much excess reserves are there? What is the money multiplier? What is the available lending capacity?
3-4 please
When the reserve requirement changes, which of the following will change for an individual bank? Multiple Choice a.) transactions account balances and lending capacity b.) required reserves, excess reserves, and lending capacity c.) transactions account balances, total reserves, and excess reserves d.) total reserves, required reserves, and excess reserves
No written by hand solution
Assuming that the reserve ratio is 10%, what amount of excess reserves are held by with the bank balance sheet listed below? Assets Liabilities & Net Worth Reserves $280,000 Checking deposits $2,800,000 Loans Outstanding $2,920,000 Total $3,200,000 Net Worth Stockholders' Equity $400,000 Total $3,200,000 a. $240,000 b. zero c. $320,000 d. $280,000
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The Island Nation of Murlonio prints its own currency called the Mariano. Use the data below to calculate the M1 measure of the money supply. Amount $4,763 $896 Source Cash in circulation Vault cash held in bank reserves Checking deposits $36,004 Savings deposits $20,824 Treasury Bills, Notes, and Bonds $45,392 Certificates of Deposit (under $100,000) $39,823 Individual Money Market Accounts $45,793 Corporate Bonds $34,580 Do not round your answer.
If the banking system has 5 million excess reserves and the required reserve ratio is 25% what is the maximum amount by wisdom money supply can be increased
The central bank buys $10,000 worth of bonds in the open market from Elaine, who deposits the proceeds in her checking account at MSM Bank. The required reserve ratio is 5%. (a) What is the amount by which MSM Bank’s liabilities have changed? Explain. (b) Calculate the change in required reserves for MSM Bank. Show your work. (c) What is the dollar value of the maximum amount of new loans MSM Bank can initially make as a result of Elaine’s deposit? Explain. (d) Based on the central bank’s open-market purchase of bonds, calculate the maximum amount by which the money supply can change throughout the banking system. Show your work. (e) How will the change in the money supply in part (d) affect aggregate demand and the price level in the short run? Explain.
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