Consider a withdrawal from the Canadian banking system of $2,500. Suppose that all commercial banks have a target reserve ratio (v) of 10 percent and there is no cash drain. a. The first round has been completed in the table below. Recalling that the new loans in the first round become the new deposits in the second round. Using the same approach, complete the table. (Round your responses to the nearest dollar. If you have rounded a number and need to use it in another calculation, you should use this rounded value. For example, if the new loans in the second round are found to be -$1,255.76 and rounded to -$1,256, then if at some later point you need to use this value, you should use -$1,256, not-$1,255.76.) Round & in Deposits -$2,500 First Second Third Fourth AReserves $250 ALoans -$2,250

Consider a withdrawal from the Canadian banking system of $2,500. Suppose that all commercial banks have a target reserve ratio (v) of 10 percent and there is no cash drain. a. The first round has been completed in the table below. Recalling that the new loans in the first round become the new deposits in the second round. Using the same approach, complete the table. (Round your responses to the nearest dollar. If you have rounded a number and need to use it in another calculation, you should use this rounded value. For example, if the new loans in the second round are found to be -$1,255.76 and rounded to -$1,256, then if at some later point you need to use this value, you should use -$1,256, not-$1,255.76.) Round & in Deposits -$2,500 First Second Third Fourth AReserves $250 ALoans -$2,250

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter28: Monetary Policy And Bank Regulation

Section: Chapter Questions

Problem 39P: Suppose the Fed conducts an open market sale by selling $10 million in Treasury bonds to Acme Bank....

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Similar questions

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.
Suppose that National bank has $36 million in checkable deposits, Commonwealth bank has $45 million in checkable deposits and the required reserve ratio for checkable deposits is 10%. If the National bank has $4 million in reserves and Commonwealth has $5 million iin reserves, how much excess reserves does each bank have? Suppose that a customer of the National bank writies a check for $2 million to a real estate broker who deposits the check at Commonwealth bank. After the check clears, how much excess reserves does each bank have?
Suppose that Mountain Star Bank discovers that its reserves will temporarily fall slightly below those legally required. How might it temporarily remedy this situation through the Federal funds market? Now assume Mountain Star finds that its reserves will be substantially and permanently deficient. What remedy is available to this bank?
Suppose again that the Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. The bank now sells $5000 in securities to the Federal Reserve Bank in its district, receiving a $5000 increase in reserves in return. What level of excess reserves does the bank now have? Why does your answer differ (yes, it does!) from the answer to question 9?