Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 21, Problem 4PA
Subpart (a):
To determine
The T-account for the bank.
Subpart (b):
To determine
The T-account for the bank.
Subpart (c):
To determine
The T-account for the bank.
Subpart (d):
To determine
The T-account for the bank.
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A 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 $........
Big bucks bank
Assets Liabilities
Total reserves $30mm demand deposits $190mm
Loans $100mm
Bonds $100mm
Stockholder equity $40 mm
Suppose the required reserve ratio is 10%. What is the maximum amount of money Big buck bank can create?
If the reserve ratio is increased to 14%, what is the maximum amount of money BBB can create?
3 If the reserve ratio is still at 10% and BBB chose to buy bonds instead of making loans with its excess reserves, what is the maximum amount of money BBB can create?
a) From question #1 & #3, if the prospective Loans and Bonds both paid interest of 6.8%, which strategy would be more profitable for BBB?
b) If BBB decided to pursue #1 as a strategy, what is the maximum money making potential of the banking…
Which of the following would cause banks to increase the amount of excess reserves that
they hold?
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
a
b
Question 25.14
C
d
Loans to customers look safe and market interest rates are high compared to the
interest rate on excess reserves.
The economy is booming and there is a great demand for business loans.
Loans to customers look unusually risky or market interest rates are low
compared to the interest rate on excess reserves.
They anticipate a bank audit.
Chapter 21 Solutions
Essentials of Economics (MindTap Course List)
Ch. 21.1 - Prob. 1QQCh. 21.2 - Prob. 2QQCh. 21.3 - Prob. 3QQCh. 21.4 - Prob. 4QQCh. 21 - Prob. 1CQQCh. 21 - Prob. 2CQQCh. 21 - Prob. 3CQQCh. 21 - Prob. 4CQQCh. 21 - Prob. 5CQQCh. 21 - Prob. 6CQQ
Ch. 21 - Prob. 1QRCh. 21 - Prob. 2QRCh. 21 - Prob. 3QRCh. 21 - Prob. 4QRCh. 21 - Prob. 5QRCh. 21 - Prob. 6QRCh. 21 - Prob. 7QRCh. 21 - Prob. 8QRCh. 21 - Prob. 9QRCh. 21 - Prob. 10QRCh. 21 - Prob. 1PACh. 21 - Prob. 2PACh. 21 - Prob. 3PACh. 21 - Prob. 4PACh. 21 - Prob. 5PACh. 21 - Prob. 6PACh. 21 - Prob. 7PACh. 21 - Prob. 8PACh. 21 - Prob. 9PACh. 21 - Prob. 10PACh. 21 - Prob. 11PACh. 21 - Prob. 12PA
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