i need in wordsnot handwritten solution please QUESTION 5Table 4 shows the credit creation information after an open market purchase of securities fromBank A by the Reserve Bank of Australia (RBA). Assume that banks loan all funds and keepno excess reserves.Table 4. Credit creationRound12BankABDeposit+$50,000+$47,000Using the data from Table 4,(a)(b)(c)(d)ReserveX+$2,820Loan+$47,000yWork out the values of x and y in Table 4.Calculate the reserve ratio and the money multiplierGiven the money multiplier from part (b), what is the total amount of money that canbe created (including the initial RBA deposit) from the initial RBA deposit?If the RBA increases the reserve ratio, how does it affect the total amount of moneycreated? Explain.

Money deposit creation: Money deposit creation is a process in which the deposit increases by the…

Table 4 shows the credit creation information after an open market purchase of securities from Bank A by the Reserve Bank of Australia (RBA). Assume that banks loan all funds and keep no excess reserves. Table 4. Credit creation Round Bank 1 A 2 B Deposit +$50,000 +$47,000 Reserve +$2,820 Loan +$47,000 y Using the data from Table 4, (a) Work out the values of x and y in Table 4. Calculate the reserve ratio and the money multiplier (b) (c) Given the money multiplier from part (b), what is the total amount of money that can be created (including the initial RBA deposit) from the initial RBA deposit?

Table 4 shows the credit creation information after an open market purchase of securities from Bank A by the Reserve Bank of Australia (RBA). Assume that banks loan all funds and keep no excess reserves. Table 4. Credit creation Round Bank 1 A 2 B Deposit +$50,000 +$47,000 Reserve +$2,820 Loan +$47,000 y Using the data from Table 4, (a) Work out the values of x and y in Table 4. Calculate the reserve ratio and the money multiplier (b) (c) Given the money multiplier from part (b), what is the total amount of money that can be created (including the initial RBA deposit) from the initial RBA deposit?

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Monetary System

Section: Chapter Questions

Problem 5PA

See similar textbooks

Similar questions

What are some ways that someone looking for a loan might reassure a bank that is faced with imperfect information about whether the borrower will repay the loan?
In a program of deposit insurance as it is operated in the United States, what is being insured and who pays the insurance premiums?
What is the risk if a bank does not diversify its loans?
What is the asset-liability time mismatch that all banks face?
True or False: 1. The main reason people demand and hold money instead of ex bonds, is that it earns interest payment. Type out the correct answer and give proper explanation of why true n why false . Answer within 40 min.thank you
: (A) Explain primary and secondary functions of Commercial Banks? (B) Discuss in detail, how commercial banks employ their funds to earn profit? (800 words)
Stealth bank has deposits of $300 million. It holds reserves of $20 million and has purchased government bonds worth $300 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank’s net worth equal? a. $1.22 billion b. $920 million c. $620 million d. $20 million
1. A bank reports the following items on its latest bat ance sheet allowance for loan and lease losses. $42 million, undivided profits, $81 million; subordinated debt capital. S3 million common stock and surplus, $27 million; equity notes, $2 million; minor. ity interest in subsidiaries, S4 million; mandatory convertible debt, s5 million; identifiable intangible assets, $3 million and noncumulative perpetual preferred stock, S5 million. How much does the bank hold in Tier 1 capital? In Tier 2 capital? Does the banks have 100 much Tier 2 capital?
b) Please explain the four main functions of the financial system.
# 7 Which of the “savings glut” or “money glut” views do you think makes more sense? Which view do you think is right? Please discuss
1. One of the consideration in making investments which allows the investor to increase the value of its assets to offset increase in the level of prices. a. TAX SHELTERb. LIQUIDITYc. INFLATION HEDGEd. PROTECTION OF CAPITAL 2. It facilitate the flow of funds from the suppliers to the demanders in the financial market. *a. GOVERNMENTb. FINANCIAL INSTITUTIONc. NET DEMANDERS OF FUNDSd. NET SUPPLIER OF FUNDS
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…