Suppose that we are a bank with $3,000 worth of deposits. We operate in an economy with a mandated reserve ratio of 12%. Suppose that the bank is keeping $450 in reserves currently, loaning out the rest of its deposits. 9. Is the bank meeting its reserve requirements? Does it have excess reserves? How much more or less must the bank lend out to just exactly meet its reserve requirements? 10. If the bank takes the action you prescribe in your answer to Question 9, how much will the total amount of deposits in the whole banking system change? Assume no cash drain. 3 11. Suppose instead that there is cash drain of 8%. Now, how much would this same action prescribed in your answer to Question 9 change the total amount of deposits in the whole banking system?

Suppose that we are a bank with $3,000 worth of deposits. We operate in an economy with a mandated reserve ratio of 12%. Suppose that the bank is keeping $450 in reserves currently, loaning out the rest of its deposits. 9. Is the bank meeting its reserve requirements? Does it have excess reserves? How much more or less must the bank lend out to just exactly meet its reserve requirements? 10. If the bank takes the action you prescribe in your answer to Question 9, how much will the total amount of deposits in the whole banking system change? Assume no cash drain. 3 11. Suppose instead that there is cash drain of 8%. Now, how much would this same action prescribed in your answer to Question 9 change the total amount of deposits in the whole banking system?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which statement about banks and risk is not correct? Select one: a. Banks face liquidity risks from lending activities. This is because the bank's assets are tied up in short- term loans whilst bank liabilities are longer-term b. Banks face credit risks from lending activities. To reduce this risk, banks require that potential borrowers put up some of their own funds or assets to serve as collateral C. Banks create bank money through their lending activities. The amount of bank money in an economy exceeds the amount of base money issued by the central bank creating liquidity risk for the bank
One effect of the September 11, 2001, terrorist attacks was to temporarily prevent banks from accessing reserves they needed to meet the demands of their customers. (This occurred because the attacks destroyed many records as well as the computers required to access backup records, and it took affected banks several weeks to become fully operational.) In response, the Fed made many billions of dollars of reserves available to banks, gradually withdrawing the new reserves from the banking system as that system returned to normal. Suppose the Fed had not injected reserves in this way. What would likely have happened to interest rates as a result? What would have been the likely impact on the stock market and on spending by consumers and businesses? Would the unemployment rate have gone up or down? Explain your reasoning in each case.
9:44 1 D) raise the reserve requirement 35) Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve raises the required reserve ratio to 12 percent, then the bank will now have excess reserves of A) $12,000. B) $0. C) -$2,000. D) -$12,000.
If the Bank of Canada performs an Open-Market-Sale with a member of the public, what is the effect on the banking system and the money supply? The banking system has fewer reserves, and the money supply tends to grow. The banking system has more reserves, and the money supply tends to fall. The banking system has more reserves, and the money supply tends to grow. The banking system has fewer reserves, and the money supply tends to fall.
Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent. If the Federal Reserve reduces the required reserve ratio to 15 percent, then the bank will now have excess reserves of $0. $5 million. $15 million. $20 million.
Consider the following scenario for a bank. It has $200 in reserves, $800 in loans, $400 in securities, $1200 in deposits, and $100 in debt. a) Calculate the bank's capital. b) Calculate the bank's leverage ratio. c) Suppose there is a stock market boom, so that the bank's assets increase by 2 percent. What is the percentage change in the bank's capital? What is the change in the bank's capital in dollars? d) Suppose that, instead of stock market boom, some borrowers default on their debt so that the bank's assets decrease by 2 percent. How much is now the bank's capital?
Suppose the bank decides to invest 45 percent of its excess reserves in short-term securities in order to earn interest. The bank issues a cashier's check to a securities dealer to purchase the securities. The securities dealer deposits the check into an account at a different bank. What will ACME Bank's balance sheet look like after the check has been processed? Fill in the values in the table below. Assume a required reserve ratio of 10 percent. The balance sheet for ACME Bank is shown below.
5. Helga sells a bond to the Fed for $1000. She deposits $900 in her bank and keeps the rest as cash. Show the impact on her bank’s balance sheet after the bank achieves equilibrium. The rrr = 10%. 6. Calculate the change in the money supply as a result of Helga’s actions. 7. How can a bank be illiquid but not insolvent? 8. The money supply is $100,000, which consists entirely of bank deposits, and required reserves are $1000. How much is deposited in banks? 9. Why don’t banks like to hold excess reserves?
Suppose $200,000 is deposited at a bank. The required reserve ratio is 20 percent, and the bank chooses not to hold any excess reserves but makes loans instead. What are the bank's total reserves? Total reserves are $ (Round your response to the nearest dollar)
Suppose banks hold no excess reserves, and R = 10%. Further assume that you receive a check for $9,000, which you deposit at your bank. It follows that your bank will be able to lend out $8,100. Don't copy paste answer please your bank’s assets and liabilities both increase by $9,000. None of the answers are correct. All of the answers are correct. your bank’s required reserves increase by $900.
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"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?