ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?
a) $5,000 billion
b) $4,937.5 billion
c) $5,062.5 billion
d) $4,995 billion
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- 11arrow_forwardpart-c: Suppose I live in a hypothetical country, Pandesia, where there is 100% reserve banking. I deposit $1,000 in a checking account at the 1st National Bank of Pandesia. Using the T-account (ie: assets on the left and liabilities on the right), explain whether / how my deposit changes the money supply in Pandesia. DON'T ANSWER PART C Just use part c to answer D part-d: Now suppose the Central Bank of Pandesia (CBP) decides that after centuries of 100% reserve banking, it is time for a change and decide to switch the Pandesian banking system to fractional reserve banking. To begin with, board of governors at the CBP agree on a required reserve ratio of 10%. How does my deposit of $1,000 at the 1st National Bank of Pandesia impact the money supply in Pandesia after this change? Explain by using the T-account. part-e: Next suppose that Pandesian economy enters a recession. To fight against the unemployment created by the recession, CBP decides to expand the Pandesian money supply.…arrow_forwardSuppose a bank has a total deposit of $748 million. If the bank’s required reserves equal $253 million, total loans equal $368 million, then the bank has excess reserves of: Group of answer choices $109 million. $115 million. $127 million. $380 million. $495 million.arrow_forward
- You are given the following balance sheet of the Summer Bank (21) Balance sheet of the Winter bank Assets Liabilities Cash $ 8,000 Deposited with the Fed $ 5,000 Loans $ 117,000 Deposits $ 80,000 Capital $ 50,000 Total $ 130,000 Total $ 130,000 The required reserve ratio (RRR) on all deposits is 5% d,What would be the excess reserves of this bank after the RRR is changed to 4%? e.How much new amount of loan will this bank be able to create with the RRR of 4%? f.How much new amount of loan the entire banking system be able to create because of the excess reserves? g.What happened to the money supply after the RRR was decreased to 4% from 5%?arrow_forwardSuppose the balance sheet of Bigfoot Bank of America is shown below: Assets Liabilities Reserves $100 Deposits $5000 Loans $4900 a) The Reserve Requirement Ratio (RRR) is 0.04 or 4%. What is the Money Multiplier? b) Suppose that Skitch brings in a deposit of $300. What will be the new Deposits, Reserves and Loans amounts immediately after this deposit? Does the bank have any Excess Reserves at this point? How much? Show your work. Deposits = Reserves Loans Excess Reserves = c) What will be the Deposits, Reserves and Loans amounts after the entire money creation process has been completed. Show your work. Deposits = Reserves = Loans =arrow_forwardThe Bank of Key West is not going to have enough reserves at the end of the business day to meet its reserve requirement of 10%. It currently has two options to borrow money overnight in order to meet the requirement. First, it could borrow money from the Federal Reserve at a rate of 1.35%. Second, it could borrow money from other banks at a rate of 0.55%. What is the federal funds rate, and what is the discount rate? 1.35 federal funds rate: Incorrect I 1.55 discount rate: Incorrect What will happen to other short-term interest rates if the Fed increases its federal funds rate target? They will also increase. They will remain unchanged.. They will become irrelevant. They will decrease.arrow_forward
- 11) Which of the following increases the quantity of money? A) an individual's cash withdrawal from a bank B) an individual's purchase of a government security from the Fed C) the Fed's purchase of a government security D) an increase in the government's budget deficit 12) Open market purchases by the Federal Reserve System (the Fed) A) raise the federal funds rate. B) increase bank reserves. C) occur when the Fed wants to decrease the quantity of money. D) All of the above answers are correct. 13) When the Fed raises the federal funds rate, A) net exports increase. B) the value of the dollar falls on the foreign exchange market. C) the value of the dollar rises on the foreign exchange market. D) consumption increases. 14) If the Fed raises the federal funds rate so that the exchange rate rises, then imports ________ and exports ________. A) increase; increase B) increase; decrease C) decrease; increase D)…arrow_forwardA bank has $20 in cash in its vaults, $280 deposited at the central bank, has made $1700 in loans to its customers and has $2000 in deposits from customers. What is this bank's actual reserve ratio? (Round to two decimal places and do not enter the percent. If your answer is 0.114 (11.4%), enter 0.11. If your answer is 0.115 (11.5%), enter 0.12. If appropriate, remember to enter the - sign.)arrow_forwardIf $50,000 is deposited in a bank operating in a banking system that has a reserve requirement of 10%, how much total money would be available to be loaned out by the entire banking system as a result of the banking multiplier? a) $5,000 b) $50,000 c) $450,000 d) $500,000arrow_forward
- Find the amount of money that would be created in the banking system because of the money multiplier if the required reserve ratio is 6%, and a bank that had been holding $550 as excess reserves decides to loan all this money out.arrow_forwardIf the required reserve ratio is 5%, how much can this bank lend? A) 400,000 B) 600,000 C) 750,000 D) 800,000 E) 900,000arrow_forward45) First National Bank has $160 million in checkable deposits, $30 million in deposits with the Federal Reserve, $10 million cash in the bank vault, and $10 million in government bonds. Given the bank's minimum reserve ratio of 20% and a goal of holding zero excess reserves, how much can the bank issue in additional loans? a) $152 million b) $16 million c) $12 million d) $8 million.arrow_forward
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