Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 13.3, Problem 4ST
To determine
The change in banking system.
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How to figure out the banks' excess reserves.
Why does the Federal Reserve require commercial banks to have reserves?
How is a bank able to lend more money than it has in reserves?
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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Similar questions
- If bank A borrows $10 million from bank B, what happens to the reserves in bank A? In the banking system? Please explain.arrow_forwardWhy don’t banks hold 100 percent reserves? How is the amount of reserves banks hold related to the amount of money the banking system creates?arrow_forwardThe 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_forward
- How is the amount of reserves banks hold related to the amount of money the banking system creates?arrow_forwardHow much new amount of loan will this bank be able to create because of the excess reserves?arrow_forwardYour friend Sarah borrows money from her bank to buy a car. Explain to her the transactions in which the bank sets up the loan, and why the loan involves an increase in the money supply.arrow_forward
- 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.arrow_forwardWhat role does the federal reserve bank play in conducting monetary policy, fiscal policy, and government intervention?arrow_forwardWhy don’t banks hold a 100 percent reserves? How is the amount of reserves bank hold related to the amount of money the banking system creates?arrow_forward
- Why can banks continue to hold reserves that are only a fraction of the demand deposits of their customers? Is your money safe in a bank? Why or why not?arrow_forwardA 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 $arrow_forwardWhich of the following is the role of the Federal Reserve System? Select one: a. Set the Required Reserve Ratio for Bank of America b. Manage the account for South Carolina and other state governments c. Make loans to local businesses d. Print new money e. All of these are roles of the Fedarrow_forward
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