ssume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets (Billions of Dollars) Total reserves 10 Checkable deposits 25 5 10 25 Loans Securities Total What is the required reserve ratio? 5% 40% Liabilities and Net Worth 10% 25% Total 25 Suppose that the Federal Reserve (the "Fed") sells $3 million of bonds to a bond dealer, who pays the Fed by writing a check against the funds in her checking account. What is the initial impact of this transaction? Checkable deposits fail by $3 million, and the banking system's holdings of securities fall by $3 million. Checkable deposits fall by $3 million, and the banking system's total reserves fall by $3 million. The banking system's holdings of securities fall by $3 million, and the banking system's total reserves rise by $3 million.
ssume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets (Billions of Dollars) Total reserves 10 Checkable deposits 25 5 10 25 Loans Securities Total What is the required reserve ratio? 5% 40% Liabilities and Net Worth 10% 25% Total 25 Suppose that the Federal Reserve (the "Fed") sells $3 million of bonds to a bond dealer, who pays the Fed by writing a check against the funds in her checking account. What is the initial impact of this transaction? Checkable deposits fail by $3 million, and the banking system's holdings of securities fall by $3 million. Checkable deposits fall by $3 million, and the banking system's total reserves fall by $3 million. The banking system's holdings of securities fall by $3 million, and the banking system's total reserves rise by $3 million.
Chapter13: The Federal Reserve System
Section: Chapter Questions
Problem 8WNG
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1st drop down options
- decrease
-increase
2nd drop down options
-7.5 million
-3 million
-5 million
-18.75 million
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