Suppose the value of the excess reserves ratio decreases. Then the money supply multiplier will Which of the following can explain a decrease in the excess reserves ratio? Public mistrust of banks A relatively large volume of cash transactions A credit crunch A relatively small volume of cash transactions Underdeveloped financial markets. increase decrease

Suppose the value of the excess reserves ratio decreases. Then the money supply multiplier will Which of the following can explain a decrease in the excess reserves ratio? Public mistrust of banks A relatively large volume of cash transactions A credit crunch A relatively small volume of cash transactions Underdeveloped financial markets. increase decrease

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.3P

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Humongous 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. Humongous Bank decides on a policy of holding 100 reserves. Draw a T-account for the bank. Humongous Bank is required to hold 5 of its existing 20 million as reserves, and to loan out the rest. Draw a T-account for the bank after it has made its first round of loans. Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original 19 million loan?
Suppose the Fed conducts an open market sale by selling $10 million in Treasury bonds to Acme Bank. Sketch out the balance sheet changes that will occur as Acme restores its required reserves (10% of deposits) by reducing its loans. The initial balance sheet for Acme Bank contains the following information: Assets - reserves 30, bonds 50, and loans 250; Liabilities - deposits 300 and equity 30.
Below is the balance sheet for a bank. Under "Other" it has listed "$X" just think of this as the dollar amount needed to make the balance sheet balance. It is not important what that value is for this question. AssetsLiabilitiesReserves 32Deposits 205Loans 150 Securities 53Other $X Using the balance sheet above, find the level of required reserves for this bank if the required reserve ratio = 8%(Give answers to 2 decimal places as needed)
Below is the balance sheet for a bank. Under "Other" it has listed "$X" just think of this as the dollar amount needed to make the balance sheet balance. It is not important what that value is for this question. AssetsLiabilitiesReserves 44Deposits 255Loans 155 Securities 51Other $X Using the balance sheet above, find the level of excess reserves this bank is holding if the required reserve ratio = 6%(Give answers to 2 decimal places as needed)
1. Legal reserve of a commercial bank A consists of cash in vault and deposits in the central bank. A question requiring a 'True/False' answer.(Required) O True O False 2.Required reserve can be used to make loans, purchase securities. A question requiring a 'True/False' answer.(Required) O True O False 3. An individual bank can create a multiple amount of deposit money from any given injection of reserves by using its excess reserve to make loans. A question requiring a 'True/False' answer.(Required) O True O False 4.If the Fed set the required reserve requirement ratio to be 0.02, bank A wishes to maintain 0.03 dollar in excess reserve for every 1 dollars in transaction deposit. What is the deposit multiplier? | (Required) If bank A found themselves with 10 in excess reserve, what is the maximum amount of new deposits (loan) created by the banking system? (Required)
13. Suppose that the T-account for Nan Bank Inc. is as follows:Assets LiabilitiesReserves $100,000Loans $400,000 Deposits $500,000If the Bank of Canada requires banks to hold 5 percent of deposits asreserves, how much in excess reserves does Nan Bank Inc. now hold?Assume that all other banks hold only the required amount of reserves. IfNan Bank Inc. decides to reduce its reserves to only the required amount, byhow much would the economy's money supply increase?
1. For this part think about Demand and supply in the market of Reserves. a. Who are on the demand side of the market? b. Who are on the supply side of the market? C. Assume equilibrium federal funds rate is strictly between discount rate and interest on reserves. Draw demand, supply and equilibrium for the market o. eserves below. (Label axis, curves and equilibrium point) d. raw NEW supply and demand graph for reserves on which equilibrium federal funds rate equals discount rate but is above interest on reserves. (again label axis, curves and equilibrium point) e. What happens on the First graph when discount rate drops? Show shift and explain how equilibrium federal funds rate and equilibrium quantity of reserves changes. (Write explanations below but make shifts on the graph for question (c)) f. - What happens on the Second graph when discount rate drops? Show shift and explain how equilibrium federal funds rate and equilibrium quantity or reserves changes. (Write explanations…
The money supply has decreased from $2.75 trillion to $2.25 trillion. Which of the following could have caused this decrease? Select one: O a. consumers withdraw deposits O b. banks hold fewer excess reserves just in case O c. purchase of securities O d. a decrease in the discount rate Next page ous page ser tour on this page 26°C Mostly cloudy e Type here to search end insert home
You take $100 you had kept under your mattressand deposit it in your bank account. If this $100stays in the banking system as reserves and if bankshold reserves equal to 10 percent of deposits, byhow much does the total amount of deposits in thebanking system increase? By how much does themoney supply increase?