Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 25, Problem 5SQ
To determine
The items that are on the asset side of Banks.
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What does it mean when a commercial bank has "excess reserves"? Select one: a. It is making above-normal profits on its loans to customers. b. Its actual reserves are less than its target reserves. c. It is in a position to make additional loans. d. Its reserves exceed its loans. e. Its loans to customers exceeds its target reserves..
Which statement about banks and risk is not correct?
Select one:
a.
Banks face liquidity risks from lending activities. This is because the bank's assets are tied up in short-
term loans whilst bank liabilities are longer-term
b.
Banks face credit risks from lending activities. To reduce this risk, banks require that potential borrowers
put up some of their own funds or assets to serve as collateral
C.
Banks create bank money through their lending activities. The amount of bank money in an economy
exceeds the amount of base money issued by the central bank creating liquidity risk for the bank
On a bank's T-account, deposits are assets, reserves
are liabilities
Select one:
True
False
Chapter 25 Solutions
Economics For Today
Ch. 25.3 - Prob. 1YTECh. 25 - Prob. 1SQPCh. 25 - Prob. 2SQPCh. 25 - Prob. 3SQPCh. 25 - Prob. 4SQPCh. 25 - Prob. 5SQPCh. 25 - Prob. 6SQPCh. 25 - Prob. 7SQPCh. 25 - Prob. 8SQPCh. 25 - Prob. 9SQP
Ch. 25 - Prob. 10SQPCh. 25 - Prob. 11SQPCh. 25 - Prob. 1SQCh. 25 - Prob. 2SQCh. 25 - Prob. 3SQCh. 25 - Prob. 4SQCh. 25 - Prob. 5SQCh. 25 - Prob. 6SQCh. 25 - Prob. 7SQCh. 25 - Prob. 8SQCh. 25 - Prob. 9SQCh. 25 - Prob. 10SQCh. 25 - Prob. 11SQCh. 25 - Prob. 12SQCh. 25 - Prob. 13SQCh. 25 - Prob. 14SQCh. 25 - Prob. 15SQCh. 25 - Prob. 16SQCh. 25 - Prob. 17SQCh. 25 - Prob. 18SQCh. 25 - Prob. 19SQCh. 25 - Prob. 20SQ
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- Use the following information to answer questions 7 through 8: Consider the following balance sheet for the bank. Assets Liabilities Reserves 500 Deposits 3000 Loans 2500 7. Suppose that the market believes there will be a contraction in the economy and part of clients who put their deposits in this bank decides to withdraw their deposits in currency, what is the minimum amount withdrawn by clients can result in a bank run?arrow_forwardOn a bank's balance sheet, ________ are assets and ________ are liabilities. A.transactions deposits; reserves and loans B.loans and transactions deposits; reserves C.reserves and loans; transactions deposits D. reserves; loans and transactions depositsarrow_forwardWhich 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.arrow_forward
- The balance sheet for the newly formed ACME Bank is shown below. Reserves listed on the balance sheet are reserves on deposit at the Federal Reserve. Cash is vault cash held in the bank. Instructions: Enter your answers as a whole number. a. Fill in the missing value in the balance sheet. ACME Bank Balance Sheet Assets Cash Reserves Property Liabilities and net worth 15,000 Checkable deposits 102,000 Stock shares 116,000 310,000 b. If the reserve requirement is 25 percent, how much in excess reserves is the bank holding?arrow_forwardQUESTION 1 Which actions by banks ensure that reserves are adequate to cover deposit outflows? A. Customer relations managment B. Asset management C. Liquidity management D. Liability managementarrow_forwardA commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10 percent. The excess reserves of the bank are: Select one: a. $50,000 b. $100,000 c. $900,000 d. $1 millionarrow_forward
- A bank almost always insists that the firms it lends tokeep compensating balances at the bank. Why?arrow_forwardExplain why a bank typically holds as reserves only a fraction of its deposit liabilities? In light of this arrangement, why is it important that depositors have confidence in their bank’s health?arrow_forwardWhich of the following are off-balance-sheet items of commercial bank? Futures. Deposits at the Federal Reserve. Federal funds sold to other banks. Household savings and time deposits.arrow_forward
- Last Bank of Panorama Springs Assets: Liabilities: Reserves $25.00 Deposits $175.00 Loans $150.00 If the reserve requirement is 12 percent, what is the state of this bank? a. It has excess reserves of more than $5000. b. It has excess reserves of less than $5000. c. It has less reserves than required. d. It can make a new loan of $17,500.arrow_forwardBank managers lend the excess reserves created when new deposits come in because they want to a. create new money in the economy. b. earn a profit. c. deplete required reserves. d. deplete desired reserves.arrow_forwardA bank is an entity that A) qualifies for FDIC deposit insurance B c) accepts demand deposits D all these answers are correct E makes business loans channels funds from savers to borrowers.arrow_forward
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