Answered: Balance sheet of Bank National Assets…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Monetary System

Section: Chapter Questions

Problem 10PA

See similar textbooks

Related questions

Question

Balance sheet of Bank National

Assets	Liabilities
Vault Cash	$1,500
Deposit in Fed	$ 500
Loans	$4,000
Total Assets	$6,000
Deposits	$6,000
Total Liabilities	$6,000

(1) If r = 10%, how much can the whole banking system expand the money supply?

a. $20,000

b. $54,000

c. $40,000

d. $11,000

e. $5,000

(2) If the Fed changed the reserve requirement from 10% to 5% - the bank’s Excess Reserves (ER) would:

a. Increase by $300

b. Increase by $1700

c. Decrease by $1400

d. Decrease by $2000

e. Increase by $5700

(3) If the Fed changed the reserve requirement from 10% to 25% the money supply (MS) in the whole banking system could:

a. Decrease by $18000

b. Decrease by $54000

c. Increase by $18000

d. Decrease by $36000

e. Increase by $36000

(4) If the Fed changed the reserve requirement from 10% to 39% Bank National would now have ER of:

a. -$340

b. -$3,660

c. -$2,340

d. -$500

e. -$250

Definition Definition Capital reserves held by banks or financial institutions over and above the reserves that are required to be maintained by the regulator toward its liabilities and for internal controls. For commercial banks, excess reserve is the amount over the standard reserve as decided by the central bank. These excess reserve funds are available in the form of cash and cash equivalents.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions