ECO 2020 INCLUSIVE ACCESS
21st Edition
ISBN: 9781260564617
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 35, Problem 3DQ
To determine
Commercial bank's assets, liabilities and balance sheet .
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- In a fractional-reserve banking system, each bank lends out 100% of deposits and does not keep reserves. Then, a one-dollar deposit will generate dollar(s) of money supply. 0 0 O infinite 01 O 10 O 100arrow_forwardSuppose a bank discovers that its reserves will temporarily fall slightly short of those legally required. How might it remedy this situation through the Federal funds market? Now assume the bank fifinds that its reserves will be substantially and permanently defificient. What remedy is available to this bank? (Hint: Recall your answer to question 4.)arrow_forwardSuppose that a small country currently has $4 million of currency in circulation, $6 million of checkable deposits, $200 million of savings deposits, $40 million of small-denominated time deposits, and $30 million of money market mutual fund deposits. From these numbers we see that this small country's MI money supply is , while its M2 money supply is O $250 million; $270 million $210 million; $280 million $10 million; $270 million $10 million; $280 millionarrow_forward
- Assume that Bank A holds total reserves of $978, the required reserves are $432 and total deposit is $3,600. If the government purchases bonds worth $260 from Bank A, excess reserves of this bank will increase by O $220 O $246.40 O $227.50 $245 $228.80arrow_forwardSuppose the value of a bank's variable-rate assets is_______ million, and the value of its variable-rate liabilities is $100 million. Since this bank has a negative gap, in market interest rates will decrease bank profits. Select one: O $150; an increase O $150; a decrease $50; a decrease $50; an increasearrow_forwardReserves Loans = A. 250/0.16 $1,562.5 B. 300/0.16 $1,875 C. 500/0.17 = $2,941.18 D. 300/0.196= $1,530.61 O E. not enough information to determine = Bank North's Balance Sheet Assets $300 Deposits Capital $1,800 $2,100 Refer to the table above. Assume that Bank North is operating at its target reserve ratio and has no excess reserves, and that all commercial banks have the same target reserve ratio. If a new deposit to the Canadian banking system of $500 is deposited at Bank North, the total new deposits created in the banking system can be calculated as follows: Liabilities $1,800 $300 $2,100arrow_forward
- 0 Question 16 Suppose the following: • Smokey Bank has total deposits of $600,000. In addition, it currently has outstanding loans in the amount of $400,000 Finally, the required reserve ratio is 15%. . . What is the money multiplier? O 0.90 0.10 090 15 O 6.67arrow_forwardRefer to the table below. Item Dollars In Billions Checkable Deposits $600 Small Time Deposits $700 Currency $500 Money-Market Mutual Funds Held by Businesses $1,200 Savings Deposits and Money-Market Deposit Accounts $2,500 Money-Market Mutual Funds Held by Individuals $800 What is the size of the M1 money supply? O $800 O $2,600 O $1,900 O $1,100arrow_forward1arrow_forward
- Suppose a banking system has a required reserve ratio of 10% and a $100,000 is deposited into the first bank in the system. What will be the immediate excess reserves for that first bank in the system and by how much can the total money supply in the system expand? $70,000; 700,000. O $100,000; $1,900,000. $90,000, $900,000. O $10,000; $100,000.arrow_forwardPlz I need help on this questionarrow_forwardSuppose there is an upswing in the economy with a large demand for finance to invest by the residential and non-residential building sector such that lending by all banks increases by $250 billion. On the assumption the reserve (or liquidity) ratio of banks is 12% this expansion in economic activity will result in an endogenous increase of O $20 billion of reserves and $230 billion of bank deposit money O $34.1 billion of reserves and $284.1 billion of bank deposit money O $20 billion of reserves and $270 billion of bank deposit money O $26.2 billion of reserves and $276.2 billion of bank deposit moneyarrow_forward
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