Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 35, Problem 5RQ
To determine
Goal of commercial bank.
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Having a good commercial bank on your side, like Suntrust or Wells Fargo, will make it much easier for your business to grow and expand
Her commercial bank account balance was rarely over two hundred.
What is a commercial bank?
O a. private bank for consumers and firms
© b. government run bank for consumers and firms
O c. an investment firm
O d.a synonym for credit union
Suppose 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 million
Suppose 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 money
Chapter 35 Solutions
Economics (Irwin Economics)
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- 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_forwardIn 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_forward0 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_forward
- Reserves 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_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_forwardWhich of the following statements is true about bonds? 1) A bond's dollar price is calculated as a growth rate. 2) The dollar price and interest rate of a bond have a positive relationship. 3) Bonds can never default. 4) The dollar price and interest rate of a bond have an inverse relationship. 5) Bonds are ownership shares in a firm.arrow_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_forwardItem Dollars Checkable Deposits Small Time Deposits Currency Money-Market Mutual Funds Held by Businesses Savings Deposits and Money-Market Deposit Accounts Money-Market Mutual Funds Held by Individuals In Billions $600 $700 $500 $1,200 $2,500 $800 What is the size of the M1 money supply? O $800 O $1,900 O $1,100 O $2,600arrow_forwardIf the reserve ratio for the bank below is 25%, is the bank current over or under reserved at by how much? Assets Liabilities/Equity Demand Deposits Reserves Loans Shareholders' equity Securities Fixed assets Total $50 250 150 50 500 Select one: O a. Over-reserved by $100 O b. Neither over or under-reserved O c. Over-reserved by $50 O d. Under-reserved by $50 e. Under-reserved by $100 Total $400 100 500arrow_forward
- The money supply is 2,000, of which 500 is currency held by the public. Bank reserves are 150. The reserve-deposit ratio equals: O a. 0.15 O b. 0.1 0.25 O d. 0.3 O e. 0.075arrow_forwardIf Bank A has $3.8 million in total deposits, $860,000 in total reserves, and faces a 12 percent reserve requirement, the amount of money that Bank A could initially create by loaning out their excess reserves is: O $100,000. O $385,000 $404,000 O $756,800 O $3,366,667arrow_forwardUsing the simply multiple deposit multiplier model, if the Federal Reserve Bank wants lending to increase by $4,500, and th required reserve ratio is 5%, how much do they need to increase reserves by? O 225 O 205 O 270 O 255arrow_forward
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