The Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $5000 in currency into the bank and that currency is added to reserves.(Please note I already have part 1 answered. If you could just help me with the rest that would be great.)( ALSO note that I have included the graph/table it is attached as a image) Recall, to calculate checkable deposits you have to add the original checkable deposits to the new deposit. To calculate required reserves for the deposits, you have to multiply the required reserve ratio (decimal from) by checkable deposits. To calculate excess reserves, you will subtract required reserves from actual reserves. Part 1: What level of excess reserves does the bank now have? (20,000+5,000)-21,000=4,000 is the amount of excess reserve. Part 2: Complete the table below for the Third National Bank. You have to distinguish between a bank's assets and bank's liabilities. The figures in the table below are for the Third National Bank. All figures are in thousands of dollars.(chart/table normally goes here.) (IT IS ATTACHED JUST AS A IMAGE THOUGH) Part 3: What is the total assets of this bank? Explain the basics of this bank’s balance sheet.
- The Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $5000 in currency into the bank and that currency is added to reserves.(Please note I already have part 1 answered. If you could just help me with the rest that would be great.)( ALSO note that I have included the graph/table it is attached as a image)
Recall, to calculate checkable deposits you have to add the original checkable deposits to the new deposit. To calculate
Part 1: What level of excess reserves does the bank now have? (20,000+5,000)-21,000=4,000 is the amount of excess reserve.
Part 2: Complete the table below for the Third National Bank. You have to distinguish between a bank's assets and bank's liabilities.
The figures in the table below are for the Third National Bank. All figures are in thousands of dollars.(chart/table normally goes here.) (IT IS ATTACHED JUST AS A IMAGE THOUGH)
Part 3: What is the total assets of this bank? Explain the basics of this bank’s balance sheet.
Part 4: If the required reserve ratio for the Third National Bank is 10 percent, what is the monetary multiplier?
Recall, to calculate you have to use the formula: Monetary Multiplier = 1÷Required Reserve Ratio. The money multiplier is a key measure in banking that helps to predict the money supply that will be available to drive economic growth. As you can see from the formula, if the reserve requirement is 20%, the money multiplier will be 1 divided by 0.2, which is 5. We can then use the money multiplier multiplied by the excess reserves to determine the maximum checkable-deposit creation that will be provided by the new money entering the system.
Part 5: If the monetary multiplier is 4, what is the required reserve ratio? Describe how and identify by what amount the Third National Bank can create money in the economy.
Recall that, generally, bank creates money in a typical economy by making loans. The Fed sets the reserve requirement (the required reserve ratio) that directly affects the amount of money creation.
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