Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781337091985
Author: N. Gregory Mankiw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 4PA
Subpart (a):
To determine
The T-account for the bank.
Subpart (b):
To determine
The T-account for the bank.
Subpart (c):
To determine
The T-account for the bank.
Subpart (d):
To determine
The T-account for the bank.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
A chartered bank has $1 million in deposits and $40,000 in desired reserves. Its excess reserves are initially zero.
a. The reserve ratio in the banking system is .......%.
b. If a further $100,000 is deposited in this bank then the bank's desired reserves increase by $.......while the bank's excess reserves increase by $........
Big bucks bank
Assets Liabilities
Total reserves $30mm demand deposits $190mm
Loans $100mm
Bonds $100mm
Stockholder equity $40 mm
Suppose the required reserve ratio is 10%. What is the maximum amount of money Big buck bank can create?
If the reserve ratio is increased to 14%, what is the maximum amount of money BBB can create?
3 If the reserve ratio is still at 10% and BBB chose to buy bonds instead of making loans with its excess reserves, what is the maximum amount of money BBB can create?
a) From question #1 & #3, if the prospective Loans and Bonds both paid interest of 6.8%, which strategy would be more profitable for BBB?
b) If BBB decided to pursue #1 as a strategy, what is the maximum money making potential of the banking…
a). Calculate excess reserves when required reserve ratio on demand deposit is 14% and required reserve ratio on time deposit is 3%. b). suppose that required reserve ratios are changed to 16% on demand deposits and 0% on time deposits. Calculate excess reserves c. suppose bank sells 3 million in securities on the open market. Calculate the change in the bank's excess reserves when the required reserve ratio on demand deposits is 14%
Chapter 11 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
Ch. 11.1 - Prob. 1QQCh. 11.2 - Prob. 2QQCh. 11.3 - Prob. 3QQCh. 11.4 - Prob. 4QQCh. 11 - Prob. 1CQQCh. 11 - Prob. 2CQQCh. 11 - Prob. 3CQQCh. 11 - Prob. 4CQQCh. 11 - Prob. 5CQQCh. 11 - Prob. 6CQQ
Ch. 11 - Prob. 1QRCh. 11 - Prob. 2QRCh. 11 - Prob. 3QRCh. 11 - Prob. 4QRCh. 11 - Prob. 5QRCh. 11 - Prob. 6QRCh. 11 - Prob. 7QRCh. 11 - Prob. 8QRCh. 11 - Prob. 9QRCh. 11 - Prob. 10QRCh. 11 - Prob. 1PACh. 11 - Prob. 2PACh. 11 - Prob. 3PACh. 11 - Prob. 4PACh. 11 - Prob. 5PACh. 11 - Prob. 6PACh. 11 - Prob. 7PACh. 11 - Prob. 8PACh. 11 - Prob. 9PACh. 11 - Prob. 10PACh. 11 - Prob. 11PACh. 11 - Prob. 12PA
Knowledge Booster
Similar questions
- Which of the following would cause banks to increase the amount of excess reserves that they hold? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a b Question 25.14 C d Loans to customers look safe and market interest rates are high compared to the interest rate on excess reserves. The economy is booming and there is a great demand for business loans. Loans to customers look unusually risky or market interest rates are low compared to the interest rate on excess reserves. They anticipate a bank audit.arrow_forwardAssets Liabilities and Equity Reserves $5,000 Demand deposits $20,000 Business loans $10,000 Student loans $8,000 Government securities $2,000 Equity (Net worth) $5,000 Total assets $25,000 Total liabilities and equity $25,000 The following is a balance sheet for Smith Bank. Assume a 10% reserve requirement. A. Calculate a 10% reserve requirement B. Calculate the maximum amount of additional loans that Smith Bank can make without selling its holdings of government securities. C. Assuming that Smith Bank and other banks now lend out all excess reserves, calculate the maximum possible change in the following: i. Demand deposits throughout the banking system ii. Total reserves throughout the banking system D. Suppose that the country's central bank purchases $1,000 of Smith Bank's holdings of government securities as part of its open market operations. Do…arrow_forwardAssets Vault Cash Deposits at Fed Loans Total $50,000 $200,000 $600,000 $850,000 Liabilities and Net Worth First Southern's bank reserves are equal to $ checking deposits, First Southern' would maintain $ reserves over and above the desired amount. Deposits $850,000 Total The increase in the money supply will be $850,000 If First Southern bank wanted to maintain 0.10 of its assets as reserves against as reserves. Therefore, it would have $ as additional If First Southern uses the reserves above the desired level to extend additional loans, the money supply would increase by S If First Southern wanted to maintain 0.05 of its assets as reserves against checking deposits, First Southern' would maintain S as reserves, additional reserves would be $ and the increase in the money supply would be $ if First Southern chooses a desired reserve ratio of 0.05.arrow_forward
- A commercial bank has actual reserves of $66,000 and checkable-deposit liabilities of $33,000, and the required reserve ratio is 5%. This bank can loan out $ at the moment. Vour AncIwer:arrow_forwardAssuming that the reserve ratio is 10%, what amount of excess reserves are held by with the bank balance sheet listed below? Assets Liabilities & Net Worth Reserves $280,000 Checking deposits $2,800,000 Loans Outstanding $2,920,000 Total $3,200,000 Net Worth Stockholders' Equity $400,000 Total $3,200,000 a. $240,000 b. zero c. $320,000 d. $280,000arrow_forwardSuppose 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. 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? 3.arrow_forward
- Economics Consider the model of financial intermediation seen in Chapter 3. Money is denoted by M, currency by C and demand deposits by D. Currency in the economy is initially $4,000, so C = $4,000. Suppose households deposit all of their currency in “Firstbank”. 1. Suppose banks hold 100% of deposits as reserves. Then the money supply is 2. Suppose that banks hold only 30% of deposits as reserves, and lend 70% of deposits. Right after Firstbank lends some of the deposits to borrowers, and before borrowers deposit the money from the loans, the money supply in the economy isarrow_forwardA commercial bank has checkable-deposit liabilities of $500,000, reserves of $150,000, and a required reserve ratio of 20 percent. The amount by which a single commercial bank and the amount by which the banking system can increase loans are respectively: Select one: a. $30,000 and $150,000 b. $50,000 and $250,000 c. $50,000 and $500,000 d. $100,000 and $500,000arrow_forwardConsider the following situation in the Canadian banking system: • The Bank of Canada purchases $3 million worth of government securities from an investment dealer with a cheque drawn on the Bank of Canada. • The dealer deposits this cheque at Bank XYZ, a commercial bank. The target reserve ratio for all banks is 30 percent. • All commercial banks operate with no excess reserves. .There is no cash drain. If Bank XYZ increases its loans to the maximum extent possible with its new excess reserves, the fourth-generation banks will be able to expand their loans by OA. $0.50 million. B. $0.72 million.. C. $0.58 million. D. $0.86 million. OE. $1.08 million. OOOarrow_forward
- "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?arrow_forwardThe government of a small country imposes a minimum reserve ratio of 7%. If a bank within this country receives a deposit of $130,000, then: Select one: a. $9,100 should be lent out to customers and $120,900 should be held by the bank b. $120,900 should be lent out to customers and $9,100 should be held by the bank c. None of the answers are correct d. $130,000 should be fully lent to customers at 7% $130,000 should be fully lent to customers at 7% $130,000 should be fully lent to customers at 7% e. $130,000 should be held by the bankarrow_forwardUse the following balance sheet for the following bank in answering questions 18 and 19. Assume the required reserve ratio is 20%. Assets $ 27,000 Liabilities and net worth Checkable deposits Capital stock S110,000 200,000 Reserves Loans 50,000 33,000 200,000 Securities Property 18. Refer to the above data. This bank can safely expand its loans by a maximum of: * $5,000. $25,000. $12,000. $7,000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc