ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- 2. Here is the balance sheet of the consolidated banking system of the country of Zargadee (all entries are in millions): Consolidated Balance Sheet of the Entire Economy of Zargadee Assets Reserves Cash in Vault Deposits at CBZ Bonds Loans 50 90 Total Reserves Total Assets 140 460 1000 1600 Liabilities Deposits Borrowing from CBZ Total Liabilities 1400 200 1600 Assume that 1) households hold no currency and 2) banks hold no excess reserves. The current reserve requirement is 10%. The Central Bank of Zargadee (CBZ) uses the three traditional tools to perform monetary policy in an economy that is reserve constrained. a. Under our assumptions, what is the money multiplier? For each part (b)-(d) below, i) Conceptually explain the effect of the policy on the money supply. ii) Calculate the change in M1 given our assumptions. iii) Construct the new balance sheet of the consolidated banking system of Zargadee under the new policy. iv) When the money supply changes, list a chain of events to…arrow_forwardThe table below is the balance sheet for the Oilers Bank, which has a target reserve ratio of 5%. Liabilities/Equity Demand Deposits Shareholders' equity Assets Reserves Loans Securities Fixed assets Total $3,000 34,000 8,500 4,500 50,000 Total $40,000 10,000 50,000 a. The Oilers Bank is over-reserved by $ b. The bank makes a loan equal to the excess reserves and the borrower writes a cheque (for the full amount of the loan) to another customer of the bank, who then deposits it. The new amount of excess reserves is $ c. Instead, the cheque written by the borrower is cleared against the Oilers Bank (the cheque was written to a customer of another bank). The amount of excess reserves held by the Oilers Bank is $arrow_forward22. Which of the following entries would appear on the liabilities side of a commercial bank's balance sheet? Government of Canada securities demand deposits cash reserves mortgage loans foreign currency reservesarrow_forward
- 11. Please answer the table only. The columns specifically.arrow_forwardPlease no written by hand Use the information presented in Northeastern Mutual Bank's balance sheet to answer the following questions. Bank’s Balance Sheet Assets Liabilities and Owners' Equity Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities $750 Capital (owners' equity) $100 Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and ? the ? account. This would also bring the leverage ratio from its initial value ? of to a new value of ? . Which of the following do bankers take into account when determining how to allocate their assets? Check all that apply. The total value of liabilities The riskiness of each asset The size of the monetary basearrow_forward11arrow_forward
- help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all workingarrow_forwardUse the information given in North Central National Bank's balance sheet to answer the following questions. Assets Reserves Loans Securities Bank's Balance Sheet $200 $800 Liabilities and Owners' Equity $1,600 Deposits Debt $1,000 Capital (owners' equity) $250 $150 Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and account. This would also bring the leverage ratio from its initial value of to a new value of Which of the following statements regarding the capital requirement is true? Check all that apply. Its intended goal is to protect the interests of those who hold equity in the bank. It specifies a minimum leverage ratio for all banks. The higher the percentage of assets a bank holds as loans, the higher the capital requirement. thearrow_forwardDon't provide handwritten solution...arrow_forward
- 5 A bank has $210,000 in excess reserves and the required reserve ratio is 25 percent. This means the bank could have total reserves. $80,000, $10,000 $100,000, $50,000 $280,000, $70,000 $50.000, $30.000 6 If a bank's excess reserve is zero and the required reserve ratio is increased, which of the following will happen? Banks will begin to extend more credit. Banks will have positive excess reserves. Banks will begin to extend more loans. Banks will have a reserve deficiency in checkable deposit liabilities andarrow_forwardThe table below is the balance sheet for all banks combined in the banking system. All banks have a target reserve ratio of 5%. Assets Reserves Loans $160,000 $ 2,533,250 Liabilities/Equity Demand Deposits $3,037,500 $ Shareholders' equity 337,500 Securities Fixed assets Total 337,500 344,250 3,375,000 Total 3,375,000 a. The amount of excess reserves is $ b. The maximum amount that loans and deposits could be increased by is $ c. Assume that the system becomes fully loaned up. Show the new balance sheet in the table above. d. Now that the system is fully loaned up, the money supply will have Increased by $arrow_forwardComplete the table below for the Third National Bank. Classify the assets and liabilities and net worth. What is the total assets of Third National Bank? Assets Liabilities and Net Worth Stock Shares $ 420 ____ ____ Reserves 25 ____ ____ Property 300 ____ ____ Securities 100 ____ ____ Loans 100 ____ _____ Demand Deposits 105 ____ ____arrow_forward
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