(a) To compute: The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

Question

The 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.

Answer 1

Question

Chapter 13, Problem 8E

To determine

(a)

To compute:

The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

To determine

(b)

To compute:

The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.

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The 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.

In the United States, the Federal Reserve sets the reserve requirement, which banks must meet through deposits at the Federal Reserve district banks and cash held at the bank. What does this requirement achieve? Check all that apply. a. It ensures that banks cannot hoard money by holding too many reserves. b. It means that a bank must have one dollar of deposits for every dollar it lends out. c. It helps to prevent bank runs by reassuring the public that banks will not make too many loans and run out of cash. d. It helps to facilitate transfers of funds between banks when a customer from one bank writes a check to a customer of another bank.

Suppose Adrienne receives a payment in cash of $400 and she deposits it in a bank. i. If the banking system is 100 percent reserve, how does the money supply change? i. If the reserve requirement is 10 percent and the bank holds no excess reserve, how does the money supply change? in. If the reserve requirement is 10 percent and the bank holds an excess reserve of 2 percent, how does the money supply change? iv. Now suppose the reserve ratio is 25 percent. How much money can be created from $100 of reserves? Show your work.

Answer 2

Question

Chapter 13, Problem 8E

To determine

(a)

To compute:

The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

To determine

(b)

To compute:

The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.

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Answer 3

Question

Chapter 13, Problem 8E

To determine

(a)

To compute:

The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

To determine

(b)

To compute:

The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.

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Answer 4

Question

Chapter 13, Problem 8E

To determine

(a)

To compute:

The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

To determine

(b)

To compute:

The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.

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Answer 5

Chapter 13, Problem 8E

To determine

(a)

To compute:

The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

To determine

(b)

To compute:

The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.

Answer 6

Chapter 13, Problem 8E

To determine

(a)

To compute:

The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

Answer 7

Chapter 13, Problem 8E

To determine

(a)

To compute:

The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

Answer 8

To determine

(b)

To compute:

The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.

Answer 9

To determine

(b)

To compute:

The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.

Answer 10

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Answer 11

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Ch. 13 - Prob. 1E Ch. 13 - Prob. 2E Ch. 13 - Prob. 3E Ch. 13 - Prob. 4E Ch. 13 - Prob. 5E Ch. 13 - Prob. 6E Ch. 13 - Prob. 7E Ch. 13 - Prob. 8E Ch. 13 - Prob. 9E Ch. 13 - Prob. 10E

(a) To compute: The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

Solution Summary: The author calculates the maximum loan the F bank can make and also the increase in the money supply based on the bank's reserve position.

(a)

To compute:

The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

(b)

To compute:

The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.

Chapter 13 Solutions

(a) To compute: The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

Solution Summary: The author calculates the maximum loan the F bank can make and also the increase in the money supply based on the bank's reserve position.

(a) To compute: The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

(b) To compute: The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.

Chapter 13 Solutions

(a)

To compute:

The maximum loan the F bank can make and alsothe increase in the money supply based on the bank's reserve position.

(b)

To compute:

The amount the F bank can lend if the reserve requirement is changed to 5 %. Also, the amount by which money supply is expanded.