Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 13, Problem 4WNG
To determine
The change in money supply.
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Find the amount of money that would be created in the banking system because of the money multiplier if the required reserve ratio is 14%, and a bank that had been holding $1,000 as excess reserves decides to loan all this money out.
Bank X has a required reserve ratio of 0.2, total reserves are $70 million, and deposits are $200 million. How much in excess reserves do they have? How much could the money supply increase?
You just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves
and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round
your answers to the nearest dollar.
If the reserve requirement is 20%, how much will your
deposit increase the total value of checkable bank deposits?
If the reserve requirement is 8%, how much will your deposit
increase the total value of checkable deposits?
Increasing the reserve requirement
decreases
the
money supply.
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Chapter 13 Solutions
Macroeconomics
Ch. 13.1 - Prob. 1STCh. 13.1 - Prob. 2STCh. 13.1 - Prob. 3STCh. 13.3 - Prob. 1STCh. 13.3 - Prob. 2STCh. 13.3 - Prob. 3STCh. 13.3 - Prob. 4STCh. 13 - Prob. 1QPCh. 13 - Prob. 2QPCh. 13 - Prob. 3QP
Ch. 13 - Prob. 4QPCh. 13 - Prob. 5QPCh. 13 - Prob. 6QPCh. 13 - Prob. 7QPCh. 13 - Prob. 8QPCh. 13 - Prob. 9QPCh. 13 - Prob. 10QPCh. 13 - Prob. 11QPCh. 13 - Prob. 12QPCh. 13 - Prob. 1WNGCh. 13 - Prob. 2WNGCh. 13 - Prob. 3WNGCh. 13 - Prob. 4WNGCh. 13 - Prob. 5WNGCh. 13 - Prob. 6WNGCh. 13 - Prob. 7WNGCh. 13 - Prob. 8WNGCh. 13 - Prob. 9WNGCh. 13 - Prob. 10WNG
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- The First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves? Show your calculations.arrow_forwardSay that First Commercial Bank has reserves of $100, loans at $400 and checkable deposits of $500. The required reserve ratio is 10%. If the bank has a deposit outflow of $40, is the bank in violation of the required reserve ratio? What is the maximum amount of deposit outflow the bank can sustain without violating the ratio?arrow_forwardThe task I am struggling with: Tracy Williams deposits $500 that was in her sock drawer into a checking account at the local bank. The reserve ratio is 10%. a) how dies the deposit initially change the T-account of the local bank? How does it change the money supply? b) If the bank maintains a reserve ratio of 10%, how will it respond to the new deposit? c) if every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan, by how much could the total money supply in the economy expand in response to Tracy´s initial cash deposit of $500? Thank you very much for your help.arrow_forward
- Distinguish between legally required reserves and excess reserves.arrow_forwardIf you deposit $40 into a checking account, and your bank has a 10% reserve requirement, the bank's excess reserves will rise by $arrow_forwardA bank has $30,000 in deposits and has $5,400 in reserves. What is its reserve ratio?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_forwardYou take $500 that you held as currency and put it into the banking system. The reserve ratio is equal to 20%. Calculate the money multiplier. By how much will increase the total amount of deposits in the banking system? By how much will increase the money supply?arrow_forwardExcess reserves are insurance from deposit outflow. Suppose you hold 15 million required reserves and 45 million excess reserves at the central bank. The total interest payment on reserves from the central bank is 0.3%. If you do not hold your excess reserves at the bank, you may take loans and earn 4% in average. What is the cost of holding excess reserve at the central bank?arrow_forward
- Required reserves in Bank two should be 10% of $80,000 demand deposits which equals 8,000. Correct?arrow_forwardThe people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 20% of the deposits as reserves. What is the money multiplier in this economy?arrow_forwardIf the Required Reserve Ratio is 25%, what is the money multiplier?arrow_forward
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