The table below provides data for a hypothetical economy. Total value of corporate shares Currency outside chartered banks Chequable notice deposits at chartered banks Publicly held demand deposits at chartered banks Federal government bonds Other liquid assets included in M2+ Nonpersonal term and foreign-currency deposits at chartered banks Personal term deposits at chartered banks Non-chequable notice deposits at chartered banks Chequable notice deposits at near banks Personal term deposits at near banks Non-chequable notice deposits at near banks Based on a. M1+ is $ b. M2 is $ c. M3 is $ d. M2+ is $ data: 278 billion billion. billion, billion. $500 billion $42 billion $102 billion $45 billion $637 billion $32 billion $268 billion $134 billion. $94 billion $89 billion $114 billion $74 billion

The table below provides data for a hypothetical economy. Total value of corporate shares Currency outside chartered banks Chequable notice deposits at chartered banks Publicly held demand deposits at chartered banks Federal government bonds Other liquid assets included in M2+ Nonpersonal term and foreign-currency deposits at chartered banks Personal term deposits at chartered banks Non-chequable notice deposits at chartered banks Chequable notice deposits at near banks Personal term deposits at near banks Non-chequable notice deposits at near banks Based on a. M1+ is $ b. M2 is $ c. M3 is $ d. M2+ is $ data: 278 billion billion. billion, billion. $500 billion $42 billion $102 billion $45 billion $637 billion $32 billion $268 billion $134 billion. $94 billion $89 billion $114 billion $74 billion

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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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 the Fed conducts an open market purchase by buying 10 million in Treasury bonds from Acme Bank. Sketch out the balance sheet changes that will occur as Acme converts the bond sale proceeds to new loans. The initial Acme bank balance sheet contains the following information: Assets - reserves 30, bonds 50, and loans 50; Liabilities - deposits 300 and equity 30.
Assume that the following asset values (in millions of dollars) exist in Ironmania: Federal Reserve Notes in circulation = $700; Money market mutual funds (MMMFs) held by individuals = $400; Corporate bonds = $300; Iron ore deposits = $50; Currency in commercial banks = $100; Savings deposits, including money market deposit accounts (MMDAs) = $140; Checkable deposits = $1500; Small-denominated (less than $100,000) time deposits = $100; Coins in circulation = $40. Recall, M1 equals Federal Reserve Notes in circulation plus checkable deposits plus Coins in circulation. M2 equals M1 plus Savings deposits, including Money market deposit accounts (MMDAs) plus Small-denominated (less than $100,000) time deposits plus Money Market Mutual Funds (MMMFs) held by individuals. 1.1 What is M1 in Ironmania? 1.2. What is M2 in Ironmania?
Assume that the following asset values (in millions of dollars) exist in Ironmania: Federal Reserve Notes in circulation = $700; Money market mutual funds (MMMFs) held by individuals = $400; Corporate bonds = $300; Iron ore deposits = $50; Currency in commercial banks = $100; Savings deposits, including money market deposit accounts (MMDAs) = $140; Checkable deposits = $1500; Small-denominated (less than $100,000) time deposits = $100; Coins in circulation = $40. Recall, M1 equals Federal Reserve Notes in circulation plus checkable deposits plus Coins in circulation. M2 equals M1 plus Savings deposits, including Money market deposit accounts (MMDAs) plus Small-denominated (less than $100,000) time deposits plus Money Market Mutual Funds (MMMFs) held by individuals. 1.1. What is M1 in Ironmania? Show your computation. 1.2. What is M2 in Ironmania? Show your computation.
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.
Assume that the following asset values (in millions of dollars) exist in Ironmania: Federal Reserve Notes in circulation = $700; Money market mutual funds (MMMFs) held by individuals = $400; Corporate bonds = $300; Iron ore deposits = $50; Currency in commercial banks = $100; Savings deposits, including money market deposit accounts (MMDAs) = $140; Checkable deposits = $1500; Small-denominated (less than $100,000) time deposits = $100; Coins in circulation = $40. Hints: Recall, M1 equals Federal Reserve Notes in circulation plus checkable deposits plus Coins in circulation. M2 equals M1 plus Savings deposits, including Money market deposit accounts (MMDAs) plus Small-denominated (less than $100,000) time deposits plus Money Market Mutual Funds (MMMFs) held by individuals. Part 1:What is M1 in Ironmania? Part 2: What is M2 in Ironmania?
Right now, the Federal Reserve is trying to reduce its balance sheet by making open marketsales. Use the market for reserves supply and demand model to show what would happen to thefederal funds rate, non-borrowed reserves, and borrowed reserves. (Assume that in the initialequilibrium, the downward-sloping part of the demand curve intersects the vertical part of thesupply curve. Be sure to label your graph and clearly state what happens to the federal fundsrate, borrowed reserves, and non-borrowed reserves.)b) Now, let's suppose that the Federal Reserve doesn't want to change the federal funds rate andwants to counteract the policy explained in the previous graph. What can the Federal Reserve doto keep the federal funds rate at its initial value (before the open market sale)? Clearly state apolicy different from open market operations to achieve this
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?
Which of the following factors pose a limit on the ability of commercial banks to increase the quantity of money in circulation by extending new loans? Select one or more: a. the quantity of Central Bank reserves that they own b. the quantity of money that savers lent to them by opening deposits c. the behavior of households and firms, which reduce the quantity of money in circulation by repaying previous loans. d. the availability of profitable lending opportunities in the economy e. the willingness of household and firms to take up new debts at the given interest rate
Assume we have a simplified banking system in balance-sheet equilibrium. Also assume thatall banks are subject to a uniform 10 percent reserve requirement and demand deposits arethe only form of money. A commercial bank receiving a new demand deposit of $100 wouldbe able to extend new loans in the amount of: Group of answer choices $1,000. $10. $100. $90.
A group of college friends decide to start their own bank, LSU Community Bank, in rural Pennsylvania. In order to get started they put in a total of $10 million of their own money and borrow $40 million from a venture debt lender. (This is known as venture debt lending.) They accept $160 million in deposits from households and businesses in the community, and, in turn, make $90 million in loans. They also purchase $95 million of mortgage-backed securities and keep the remainder of their assets as reserves at the Philadelphia Federal Reserve District Bank. a. Show LSU Community Bank's balance sheet. b. What is LSU Community Bank's reserve-deposit ratio? c. What is LSU Community Bank's asset to equity ratio?
A group of college friends decide to start their own bank, LSU Community Bank, in rural Pennsylvania. In order to get started they put in a total of $10 million of their own money and borrow $40 million from a venture debt lender. (This is known as venture debt lending.) They accept $ 160 million in deposits from households and businesses in the community, and, in turn, make $ 90 million in loans. They also purchase $ 95 million of mortgage-backed securities and keep the remainder of their assets as reserves at the Philadelphia Federal Reserve District Bank. a. Show LSU Community Bank's balance sheet. b. What is LSU Community Bank's reserve-deposit ratio? C. What is LSU Community Bank's asset to equity ratio? d. Suppose the housing market tanks and the market value of the bank's mortgage-backed securities falls by 10%. i. Show LSU Community Bank's new balance sheet. ii. By what percentage does the value of the bank's assets fall? iii. By what percentage does the value of the bank's…