Assume that Money Wang sells his bonds to BSP amounting to P50,000. From this, Money Wang receives a check awarded by BSP with the same amount. Money Wang deposits the check at Metrobank. In the banking system, BSP's required reserve ratio is 20%, and that the banking system currently has no excess reserves. Answer the following questions: 1. By how much will be the change in Metrobank's checkable deposit on its balance sheet? 2. How much is the change in the required reserves and the excess reserves þn Metrobank's balance sheet? 3. Now assume that Metrobank lends out all of its excess reserves to Roberta Marasigan. Determine the amount that Metrobank can lend to Roberta Marasigan. 4. Roberta Marasigan deposits the loaned amount in BDO. BDO, just like Metrobank, loans out also all its excess reserves from Roberta Marasigan's deposit to Noella Bautista. A. What will be the amount of the loan by BDO? B. Determine the change in the checkable deposit on the balance sheet of BDO. 5. Now think of this process to repeat again and again in the banking system. A. What is the banking system's money multiplier? B. Given the above money multiplier, by how much will the total money supply change due to the purchase of bonds by the BSP? 6. Assume this time that the government, through BSP, wants to use this P50,000Cbond purchase to target an increase in the total money supply worth P350,000. Determine the required reserve ratio that will be needed to reach that target. Note: Show supporting calculations.
Assume that Money Wang sells his bonds to BSP amounting to P50,000. From this, Money Wang receives a check awarded by BSP with the same amount. Money Wang deposits the check at Metrobank. In the banking system, BSP's required reserve ratio is 20%, and that the banking system currently has no excess reserves. Answer the following questions: 1. By how much will be the change in Metrobank's checkable deposit on its balance sheet? 2. How much is the change in the required reserves and the excess reserves þn Metrobank's balance sheet? 3. Now assume that Metrobank lends out all of its excess reserves to Roberta Marasigan. Determine the amount that Metrobank can lend to Roberta Marasigan. 4. Roberta Marasigan deposits the loaned amount in BDO. BDO, just like Metrobank, loans out also all its excess reserves from Roberta Marasigan's deposit to Noella Bautista. A. What will be the amount of the loan by BDO? B. Determine the change in the checkable deposit on the balance sheet of BDO. 5. Now think of this process to repeat again and again in the banking system. A. What is the banking system's money multiplier? B. Given the above money multiplier, by how much will the total money supply change due to the purchase of bonds by the BSP? 6. Assume this time that the government, through BSP, wants to use this P50,000Cbond purchase to target an increase in the total money supply worth P350,000. Determine the required reserve ratio that will be needed to reach that target. Note: Show supporting calculations.
Chapter14: Banking And The Money Supply
Section: Chapter Questions
Problem 3.4P
Related questions
Question
Need answers for number 5 (A and B) and number 6
Transcribed Image Text:Assume that Money Wang sells his bonds to BSP amounting to P50,000. From
this, Money Wang receives a check awarded by BSP with the same amount.
Money Wang deposits the check at Metrobank. In the banking system, BSP's
required reserve ratio is 20%, and that the banking system currently has no
excess reserves. Answer the following questions:
1.
By how much will be the change in Metrobank's checkable deposit on its balance
sheet?
2.
How much is the change in the required reserves and the excess reserves þn
Metrobank's balance sheet?
3.
Now assume that Metrobank lends out all of its excess reserves to Roberta
Marasigan. Determine the amount that Metrobank can lend to Roberta Marasigan.
Roberta Marasigan deposits the loaned amount in BDO. BDO, just like Metrobank,
loans out also all its excess reserves from Roberta Marasigan's deposit to Noella
Bautista.
4.
A. What will be the amount of the loan by BDO?
B. Determine the change in the checkable deposit on the balance sheet
of BDO.
5.
Now think of this process to repeat again and again in the banking system.
A. What is the banking system's money multiplier?
B. Given the above money multiplier, by how much will the total money
supply change due to the purchase of bonds by the BSP?
6. Assume this time that the government, through BSP, wants to use this
P50,000Cbond purchase to target an increase in the total money supply worth
P350,000. Determine the required reserve ratio that will be needed to reach that
target.
Note: Show supporting calculations.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
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.Recommended textbooks for you
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Macroeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506756
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning