ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose the banking system does NOT hold
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- If Jason deposits $2,500 into his bank and the reserve ratio is 11%, what would be the amount of excess reserves that are immediately created? $30.25 $244.75 $275 $1,980.25 $2,225arrow_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_forwardIf the reserve requirement is 4 percent, what is the money multiplier?arrow_forward
- During the Great Depression, some 9000 banks went bankrupt, 4000 in 1933 alone. Given this is a fractional reserve system, what would happen to Money (M1)/money multiplier, if demand deposits at bankrupt banks became worthless due to widespread bankruptcy in the banking system ?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_forwardIf the Federal Reserve increases the discount rate from 14 percent to 16 percent banks will borrow Multiple Choice fewer reserves from the Fed and lending will increase. fewer reserves from the Fed and lending will decrease. more reserves from the Fed and lending will increase. more reserves from the Fed and lending will decrease.arrow_forward
- If $5000 is deposited into a bank with a reserve ratio of 5%: 1. How much will the total money supply increase? 2. How much "new money" will be created?arrow_forwardIf a bank has $100,000 in deposits and holds $5,000 in required reserves, what is the value of the money multiplier?arrow_forwardsuppose the required reserve ratio is 11%. How much additional money can BBB lend out at a maximum? suppose the required reserve ratio is lowered to 8%. What is the Maximum amount of additional money that BBB can lend out? Is this different than the maximum amount of new money BBB can create by itself? 3. suppose the required reserve ratio is raised to 15%. What is the maximum amount of additional money BBB can lend out?arrow_forward
- If the required reserve ratio (RRR) in U.S. is 10 percent and you deposit $5,000, which is wired from your parents’ bank account in Germany to your checking account in the U.S. National Bank, then the change in the U.S. money supply eventually should be Group of answer choices a $45,000 increase. a $5,000 increase. no change. a $50,000 increase.arrow_forwardFind the value of money multiplier if the required reserve ratio is 50%?arrow_forwardSuppose that you find $100 dollars and you deposit it into your bank account as a checkable deposit. If the require reserve ratio is 20%, how much will the money supply increase due to the initial $100 deposit in the banking system.arrow_forward
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