MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
10th Edition
ISBN: 9781319467203
Author: Mankiw
Publisher: MAC HIGHER
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Question
Chapter 18, Problem 5QQ
To determine
The impact of change in the value of a bank’s assets.
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Students have asked these similar questions
Because banks rely on leverage, a
change in the value of a bank's assets
leads to a proportionately larger change
in the bank's
a. reserves.
b. deposits.
c. capital.
d. liabilities.
If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank
A. must increase its required reserves by $10.
B. will initially see its total reserves increase by $10.50.
C. will be able to make new loans up to a maximum of $9.50.
D. All of the above are correct.
What are bank reserves?
a.Deposits that are held in the form of gold reserves
b.The fraction of deposits kept as currency that are not used for lending purposes
c.The value of the owner’s equity in the bank
d.The value of investments a bank keeps in excess of the value of deposits
e.The sum of all loans a bank makes to borrowers
Chapter 18 Solutions
MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
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Similar questions
- The Federal Reserve a. was created in 1896. b. is part of the executive branch of government. c. is the central bank of the United States. d. is only responsible for controlling the money supply.arrow_forwardOn a bank's T-account, deposits are assets, reserves are liabilities Select one: True Falsearrow_forwardWhen the Fed says it's a "lender of last resort," it means A. it will only make discount loans to the government or GSEs (government-sponsored enterprises) B. it will assist banks that are "too big to fail" by buying up bad assets C. it will lend reserves to any struggling bank D. it will lend reserves to solvent banksarrow_forward
- A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10 percent. The excess reserves of the bank are: Select one: a. $50,000 b. $100,000 c. $900,000 d. $1 millionarrow_forwardA 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 $........arrow_forwardThe major assets on a bank's balance sheet are its checking and savings account deposits. loans, and checking and savings account deposits. reserves, loans, and holdings of securities. reserves, checking and savings account deposits.arrow_forward
- The balance sheet for the newly formed ACME Bank is shown below. Reserves listed on the balance sheet are reserves on deposit at the Federal Reserve. Cash is vault cash held in the bank. Instructions: Enter your answers as a whole number. a. Fill in the missing value in the balance sheet. ACME Bank Balance Sheet Assets Cash Reserves Property Liabilities and net worth 15,000 Checkable deposits 102,000 Stock shares 116,000 310,000 b. If the reserve requirement is 25 percent, how much in excess reserves is the bank holding?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_forwardOn a bank's balance sheet, ________ are assets and ________ are liabilities. A.transactions deposits; reserves and loans B.loans and transactions deposits; reserves C.reserves and loans; transactions deposits D. reserves; loans and transactions depositsarrow_forward
- 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 bankarrow_forwardA bank's liquid assets consist of?arrow_forwardHumongous Bank is the only bank in the economy.The people in this economy have $20 million in money,and they deposit all their money in Humongous Bank.a. Humongous Bank decides on a policy of holding100% reserves. Draw a T-account for the bank.b. Humongous Bank is required to hold 5% of itsexisting $20 million as reserves, and to loan outthe rest. Draw a T-account for the bank after ithas made its first round of loans.c. Assume that Humongous bank is part of amultibank system. How much will money supplyincrease with that original $19 million loan?arrow_forward
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