6 Philippines Central Bank (BSP) plans to increase the RequiredReserve Ratio (RRR) of banks from 2% to 3% in July 2021.Reserves by banks in BSP=100, Gov't securities of BSP=400. Loansto Bank. You may use T1&T2 below to facilitate your problem solvingT1 Required Reserve Ratio 0.02 (PHP Billion)BSP Balance SheetASSETSGovt'SecuritiesLoans to banksLIABILITIESReservesCashMoney MultiplierBSPASSETSGovt'SecuritiesLoans to banksLIABILITIESReservesCash400Money Multiplier100100T2 Required Reserve Ratio 0.03 (PHP Billion)400100100COMM'L BANKS' Balance SheetASSETSReservesVLoansLIABILITIESDepositsLoans owed to BSP(M1-Cash+deposit)COMM'L BAMKSASSETSReservesLoansLIABILITIESDepositsLoans owed to BSP(M1-Cash-deposit)Given RRR = .02, how many times will deposit in banks be compared to Reserves?[Select]2Given RRR = .02, how much loans, in pesos, can the banks extend to their borrowers?[Select]Given RRR = .02, BSP plans to reduce loans to banks to PHP50 billion. How muchloans can bank extend? [Select]When RRR is increased from 2% to 3%, what is the effect on M1?[Select]V

Information are extracted from T1 and T2 RRR=0.02=2% Loan given to commercial bank=100 From T2…

Philippines Central Bank (BSP) plans to increase the Required Reserve Ratio (RRR) of banks from 2% to 3% in July 2021. Reserves by banks in BSP=100, Gov't securities of BSP=400. Loans to Bank. You may use T1&T2 below to facilitate your problem solving T1 Required Reserve Ratio 0.02 (PHP Billion) BSP Balance Sheet ASSETS Govt'Securities Loans to banks LIABILITIES Reserves Cash Money Multiplier BSP ASSETS Govt'Securities Loans to banks LIABILITIES Reserves Cash 400 Money Multiplier 100 100 T2 Required Reserve Ratio 0.03 (PHP Billion) 400 100 COMM'L BANKS' Balance Sheet 100 ASSETS Reserves Loans LIABILITIES Deposits Loans owed to BSP (M1=Cash+deposit) COMM'L BAMKS ASSETS Reserves Loans LIABILITIES Deposits Loans owed to BSP (M1-Cash deposit) 2

Philippines Central Bank (BSP) plans to increase the Required Reserve Ratio (RRR) of banks from 2% to 3% in July 2021. Reserves by banks in BSP=100, Gov't securities of BSP=400. Loans to Bank. You may use T1&T2 below to facilitate your problem solving T1 Required Reserve Ratio 0.02 (PHP Billion) BSP Balance Sheet ASSETS Govt'Securities Loans to banks LIABILITIES Reserves Cash Money Multiplier BSP ASSETS Govt'Securities Loans to banks LIABILITIES Reserves Cash 400 Money Multiplier 100 100 T2 Required Reserve Ratio 0.03 (PHP Billion) 400 100 COMM'L BANKS' Balance Sheet 100 ASSETS Reserves Loans LIABILITIES Deposits Loans owed to BSP (M1=Cash+deposit) COMM'L BAMKS ASSETS Reserves Loans LIABILITIES Deposits Loans owed to BSP (M1-Cash deposit) 2

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter13: Money And The Banking System

Section: Chapter Questions

Problem 18CQ

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The table below reports the breakdown of assets and liabilities for all commercial banks for January 2020, two months before the start of the COVID-19 recession, and December 2020. Assets (in billions of dollars) Liabilities (in billions of dollars) Jan-20 Dec-20 Jan-20 Dec-20 Loans $10,041.54 $10,376.47 Deposits $13,293.30 $16,061.82 Reserves $1,768.52 $3,168.94 Borrowings $1,965.90 $1,715.81 Treasury Securities $3,008.19 $3,726.10 Other Liabilities $593.42 $825.74 Other Assets $2,984.52 $3,224.45 Total Assets $17,802.77 $20,495.96 Total Liabilties $17,802.77 $20,495.96 From January to December, the net worth of banks changed by $___ billion (round your answer to two decimal places).
§Suppose that the T-account for First National Bank is as follows: Assets Liabilities Reserves: 90.000-TL Deposits: 500.000-TL Loans: 410.000-TL § §If the Central Bank requires banks to hold 10% of deposits as reserves, how much in excess reserves does First National Bank now hold? MM=1/rr MM=1/(10/100) MM=10 40000*10=400000TL §Assume that all other banks hold only the required amount of reserves. If First National decides to reduce its reserves to only the required amount, by how much would the economy’s money supply increases?
You have been promoted to head of Treasury and Investment Management at Ecobank andhave been handed information on a number of issues for which immediate answers arerequired. For each excerpt from the issues presented below answer the associatedquestion(s):(i) Ecobank holds ¢500 million T-Bill but is in short of cash. It needs cash to meetthe requirement of a customer who has come to withdraw ¢400million.Youhave been asked to approach Barclays Bank to sell the T-Bill for ¢495 millionwith agreement to repurchase within 4 working days.(a) How much in cedis does Ecobank lose in this transaction(b) What is the Repo Rate on this transaction (ii) You have just been offered a commercial paper with a face value of ¢45,000,000which bears a discount of 36% and has 182 days to mature.(a) How much will you be prepared to pay for this paper? (b) What is the cedi discount on the paper? (iii) Ecobank plans to issue a 2-year bond with a face value of ¢500,000,000 bearing20% coupon rate. The market…
Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 10%. Eric, a Southeast Mutual Bank customer, deposits $250,000 into his checking account at the local branch. Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 10%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 250,000 Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Cho, who immediately uses the funds to write a check to Bob. Bob deposits the funds immediately into his checking…
Question 1) Explain what will happen to M1 and M2 measures of money supply if an individual moves money from demand deposit account to a small-denomination time deposit. Question 2) Issuing marketable securities is the primary way businesses finance their operations. Trueor false? Explain your answer. If a four-year bond with a $2000 face value has a coupon rate of 2.5%, and the currentmarket interest rate is 4%, what is the market price of the bond? If this bond sold for $1900, is theyield to maturity greater or less than 4%? Why?
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Marly Bank currently has $650M in transaction deposits on its balance sheet. The current reserve requirenment is 10 percent, but the Federal Reserve is decreasing this requirement to 9 percent. Show the balance sheet for the federal reserve and Marly Bank if Marly Bank converts all excess reseves to loans, but borrowers return only 60 percent of these funds to National Bank as transaction deposit.
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Assuming an economy have only two commercial banks in it banking system, Classic Bank and Prudent Bank. The following shows the balance sheet of the two banks as at 2019.Classic BankBalance sheet as at December, 2019GHSm GHSmAssets: Liabilities & Equity:Reserves 1,000 Deposits 3,000Securities 2,000 Equity 7,000Loans & Advances 1,000Property, Plant and Equipment 6,000 .10,000 10,000 Prudent BankBalance sheet as at December, 2019GHSm GHSmAssets: Liabilities & Equity:Reserves 600 Deposits 2,500Securities 1,500 Equity 4,400Loans & Advances 800Property, Plant and Equipment 4,000 .6,900 6,900Assume a required reserve ratio of 10%.(a) What is the amount of excess reserves in this commercial banking system? (b)What is the maximum amount that the money supply can be expanded? What would be the effect of a fall in reserve ratio to 5%, on the maximum amount that the money supply can be expanded? (c) Determine the stock of broad money supply assuming the non-bank public holds…
The Bangladesh Bank has created additional money worth Tk70,794 crore through various refinance schemes and easing regulatory requirements after the Covid-19 outbreak in March for stimulating demand to revive the declining economy. (link: https://tbsnews.net/economy/banking/bangladesh-bank-creates-money-worth-over-tk70000cr-revive-economy-76435?fbclid=IwAR108OXKcbXq6JjZj6v9FbULrDtys_QsZySUTKeAmauoqTjppgnLqU89muw#.Xq5kdXhgRqq.facebook). Do you think creating this additional money will lead to inflation? What type of inflation, demand-induced or supply-induced? Do you think it will be continued inflation? Why? Draw a relevant diagram to explain your answer.
The Bangladesh Bank has created additional money worth Tk70,794 crore through various refinance schemes and easing regulatory requirements after the Covid-19 outbreak in March for stimulating demand to revive the declining economy. (link: https://tbsnews.net/economy/banking/bangladesh-bank-creates-money-worth-over-tk70000cr-revive-economy-76435?fbclid=IwAR108OXKcbXq6JjZj6v9FbULrDtys_QsZySUTKeAmauoqTjppgnLqU89muw#.Xq5kdXhgRqq.facebook). Creating additional money will increase money supply. What will happen to price level? Which theory did you use to answer the question? Explain the theory
It is not unusual to find a business that displays a signsaying “no personal checks, please.” On the basis of thisobservation, comment on the relative degree of liquidityof a checking account versus currency