Suppose that currency in circulation is $800 billion, the amount of checkable deposits is $1200 billion, the requiredreserve ratio is 10% and excess reserves are $12 billion. c. Suppose the central bank conducts the same open marketpurchase as in part (b), except that banks choose to hold all of these proceeds as excess reserves rather than loan themout, due to fear of a financial crisis and bank run. Assuming that currency and deposits remain the same, what happensto the amount of excess reserves, the excess reserve ratio, the money supply, and the money multiplier?

The objective of the question is to understand the impact of an open market purchase by the central…

Answered: Suppose that currency in circulation is…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 3.4P

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§Suppose that the T-account for First National Bank is as follows: Assets Liabilities Reserves: 90.000-TL Deposits: 500.000-TL Loans: 410.000-TL § §If the Central Bank requires banks to hold 10% of deposits as reserves, how much in excess reserves does First National Bank now hold? MM=1/rr MM=1/(10/100) MM=10 40000*10=400000TL §Assume that all other banks hold only the required amount of reserves. If First National decides to reduce its reserves to only the required amount, by how much would the economy’s money supply increases?
2. Suppose that the required reserve ratio is 8% (i.e. rr = RR = 0.08), banks hold 5% of checking ER account deposits as excess reserves (i.e. e = = 0.05), and the currency-to-deposit ratio is 0.5 (i.e. c= = 0.5). a. Use this information to calculate the money multiplier. b. How would your answers to part (a) change if banks become concerned about risks inxolved in making loans and now choose to hold 20% of checking account deposits as excess, reserves (e=0.20)? Compute the new value of the money multiplier. c. Starting from part (a) what happens to money multiplier if people decide to hold more CUTTENCY, resulting in an increase in currency-deposit from c 0.5 to c 0.8? d. If the Fed conducts open market operations and buys $100 million in Treasury bonds from banks, what will happen to money supply using the multipliers in part (a), (b), and part (c)?
Suppose that an open economy starts with $1,000 and all of this money is deposited into a First Economy Bank. The T-account for First Economy bank is shown below. Assets Liabilities Required Reserves 100 Deposits $1000 Loans $400 Treasury Bills $800 Given the information above, how much capital does the bank currently hold and what is the required reserve ratio? $300; 1% $1,300; 10% $1000; 10% $500; 40%
Q1. Assume the initial deposit made by customers of Multi-Credit Savings and Loans Limited Kuntenase branch for the month of April, 2020 was GH₵ 150,000.00 (One hundred and fifty thousand Ghana cedis). However, the Bank kept 25% of the deposits as reserves whiles the remaining was given out as loans and advances to customers.i. Find the money multiplier effect for Multi-Credit Savings and Loans Limited for the month of April, 2020. ii. Calculate the total deposit made by customers of the Bank. Q2. Why does interest rate links the two halves of the IS – LM model together? Q3. Using IS-LM curves, critically examine how government spending on coronavirus disease, 2019 (covid 19) will impact on the national output (income) Q4. ‘‘Increase in money supply in an economy increases inflation’’. Use appropriate diagram(s) to explain the validity or otherwise of the above statement. Q5. Briefly explain how open-market operations could be used to increase money supply.
Which volume of OMOs is required to keep money supply unchanged, if demand for borrowedreserves increases by $0.5 trillion and the central bank decreases required reserves ratio from 10 to7% (the volume of required reserves created by the banking system was 1.5 trillion)? Use the conceptof a money multiplier and currency ratio of 0.2 and excess reserves ratio of 0.03.
5.Suppose there was a banking crisis. The money supply would shrink by the greatest amount if the public ________ their currency-deposit ratio and the banks ________ their reserve-deposit ratioTop of Form decreased; increased increased; decreased decreased; decreased increased; increased
126. The current degree of yield of the economy is $ 1,700 bil-lion. Arranged reserve funds are $ 255 billion, the public authority plans to demand expenses of $ 470 billion, and organizations are planning to spend $ 240 billion. What level of government use will adjust the economy at its current out-put level, if there are no worldwide exchanges?
FORUM DESCRIPTION IS CRYPTOCURRENCY MONEY, WILL IT INSTRUCTION: You are required to post an original comment and also respond to at least two other comments to agree/clarify/disagree BECOME MONEY, & WHAT MAY BE THE EFFECT OF CENTRAL BANK DIGITAL CURRENCY ON PRIVATE CRYPTOS? In your post, give us one reason, based on definition of money, for or against adopting cryptocurrency as money, exactly like the dollar. Also, given that we do not use cryptocurrency to pay for grocery in almost all countries and territories, give two key reasons why it has not been widely accepted as money. What is the effect of central bank cryptocurrency (like digital dollar or Yuan) on your previous answer?
Scenario: Aggregate banking statistics show that collectively the banks of CountryA hold $300 million of required reserves, $75 million of excess reserves, have issued $7,500 million of deposits, and hold $225 million of Treasury bonds, and the left $6900 million is all loaned out. Citizens of CountryA prefer to use only demand deposits and so all money is on deposit at the bank. Suppose that the Bank of countryA changes the reserve requirement to 3 percent. Assuming that the banks still want to hold the same amount of excess reserves, what is the value of the money supply after banks eventually adjust everything to the change in the reserve requirement? Group of answer choices: A:$9,375 million B：$10,000 million C：$10,625 million D：$7,500 million Please provide detailed reasoning about this question.
Suppose that the bank holds $15m of treasury bonds, $10m of reserves, $30m of checkable deposits, $20 of time deposits and has $6m of capital. How much loan does the bank have if we know it doesn't have any other assets or liabilities Suppose in the same bank checkable deposits and reserves pay 0 interest. The interest rate on treasuries is 3%, loans pay 7% and time deposits pay 5%. How much profit does the bank make? What is the banks return on assets?
Suppose that the following information describes the banking system in Belarus. Currency = $940 billion Checking Deposits = $1,475 billion Total Reserves = S198 billion Required Reserves = $177 billion (a) Calculate the level of the monetary base (MB) in the banking system of Belarus. (b) Given the above data calculate the money multiplier (m). Round vour answer to 2 decimal places.
Answer the question on the basis of the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All figures are in billions.Assets:reserves $51loans $109securities $100property $10Liabilities + net worth:checkable deposits $140stock shares $130Refer to the data. The commercial banking system has excess reserves of:$9 billion.$7 billion.$6.1 billion.$5 billion.

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