Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 14P
To determine
(a)
To compute:
The potential change in demand deposits for the given situation if the
To determine
(b)
To compute:
The potential change in demand deposits for the given situation if the required reserve ratio is
To determine
(c)
To compute:
The potential change in demand deposits for the given situation if the required reserve ratio is
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
John deposits $1,600 into his checking account. If the reserve ratio is 5%, what are the
required and excess reserves?
Required reserves: $
Excess reserves: $
The central bank buys $10,000 worth of bonds in the open market from Elaine, who deposits the proceeds in her checking account at MSM Bank. The required reserve ratio is 5%.
(a) What is the amount by which MSM Bank’s liabilities have changed? Explain.
(b) Calculate the change in required reserves for MSM Bank. Show your work.
(c) What is the dollar value of the maximum amount of new loans MSM Bank can initially make as a result of Elaine’s deposit? Explain.
(d) Based on the central bank’s open-market purchase of bonds, calculate the maximum amount by which the money supply can change throughout the banking system. Show your work.
(e) How will the change in the money supply in part (d) affect aggregate demand and the price level in the short run? Explain.
If you deposit $40 into a checking account, and your bank has a 10% reserve requirement, the bank's excess reserves will rise by $
Chapter 17 Solutions
Exploring Macroeconomics
Knowledge Booster
Similar questions
- if a bank has required reserves of $45,000,000, excess reserves of $12,000,000, and deposits of $90,000,000 with a required reserve ratio of 50%, how much can the bank lend out?arrow_forwardSuppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 25%. The Federal Reserve buys a government bond worth $1,800,000 from Felix, a customer of First Main Street Bank. He deposits the money into his checking account at First Main Street Bank. Now, suppose First Main Street Bank loans out all of its new excess reserves to Deborah, who immediately writes a check for the full amount to Carlos. Carlos then immediately deposits the funds in his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Larry, who writes a check to Janet, who deposits the money in her account at Third Fidelity Bank. Finally, Third Fidelity lends out all of its new excess reserves to Megan. Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $1,800,000 injection…arrow_forwardIf the reserve ratio was 20% and someone deposited an additional $8,000, what would be the maximum increase in total deposits?arrow_forward
- If the required reserve ratio is 0.10, the maximum increase in checking account deposits that will result from an increase in bank reserves of $10,000 is $200000. (Enter your response as an integer.)arrow_forwardWhen Christine deposits $1,000 in Bank A, and there is a reserve requirement ratio of 10%, how much can Bank A lend out?arrow_forwardFind the required reserve if the excess reserve is $600 and the actual reserve is $100arrow_forward
- When you open a checking account at Bank of America, Bank of America has more reserves and more excess reserves. has more reserves, but excess reserves remain unchanged. has more deposits and less in excess reserves. has more deposits, but excess reserves remain unchanged.arrow_forwardIf you deposit a $300 check in your account and the required reserve ratio is 10 percent then the banks answer D,E and Farrow_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_forward
- If the required reserve ratio (RRR) in U.S. is 10 percent and you deposit $5,000, which is wired from your parents’ bank account in Germany to your checking account in the U.S. National Bank, then the change in the U.S. money supply eventually should be Group of answer choices a $45,000 increase. a $5,000 increase. no change. a $50,000 increase.arrow_forwardIf a Bank accepts a deposit of $1,000 and the required reserve ratio is 20%, how much can the Bank lend to a potential borrower? A) $900 B) $800 C) $600 D) $400arrow_forwardExcess reserves are insurance from deposit outflow. Suppose you hold 15 million required reserves and 45 million excess reserves at the central bank. The total interest payment on reserves from the central bank is 0.3%. If you do not hold your excess reserves at the bank, you may take loans and earn 4% in average. What is the cost of holding excess reserve at the central bank?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning