MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 12, Problem 3TY
a)
To determine
To describe: The effect on the balance sheets on the basis of transactions in the table 2 and 3 after drawing 100$ from the checking account.
b)
To determine
To describe: The effect on the accounts when S deposits a 100$ bill in his checking account.
c)
To determine
To describe: The effect on the accounts when Mary withdraws 500$ from her account at hometown Bank and deposited it to a big city bank.
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Which of the following activities will affect a bank’s required reserves? why?
a. The local Girl Scout troop collects coins and currency to buy a new camping stove. The troop deposits $250 in coins and opens a small-time deposit.
b. You decide to move $200 from your MMDA to your NOW account.
c. You sell your car to the teller at your bank for $5,000. The teller pays with a check drawn on the bank, and you deposit the check immediately into your checking account at the bank
A bank has the following deposits and assets:
Checkable deposits held by individuals and businesses,
$380
Savings deposits held by individuals and businesses,
$1,280
Small time deposits,
$575
Loans to businesses,
$1,809
Outstanding credit card balances,
$300
Government securities,
$125
Currency in the bank's vault,
$1
Reserve account at the Fed,
$8
Calculate the bank's total deposits, deposits that are part of M1, and deposits that are part of M2.
The bank's total deposits are
$
Deposits that are part of M1 are
$
Deposits that are part of M2 are
$
Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 25%. The Federal Reserve buys a government bond worth $1,800,000 from Felix, a customer of First Main Street Bank. He deposits the money into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's balance sheet (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effects of the new deposit on excess and required reserves, assuming a required reserve ratio of 25%. Hint: If the change is negative, be sure to enter the value as a negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 1,800,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Deborah, who immediately writes a check for the full amount to Carlos.…
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