Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
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Question
Chapter 13, Problem 17CQ
(a)
To determine
Identify the
(b)
To determine
Identify the maximum loan that the bank will extend.
(c)
To determine
Identify the changes in the bank balance sheet.
(d)
To determine
Describe whether the bank would extend an additional loan or not.
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Suppose you win on a scratch-off lottery ticket and you decide to put all of your $2,500 winnings in the bank. The reserve
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What would be the immediate effect if the central bank increases the cash reserve ratio?
a.
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Chapter 13 Solutions
Macroeconomics: Private and Public Choice
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- Fill in the blanks to make the following statements correct. a. Suppose the Bank of Canada purchases a $10,000 bond from Bob's Financial Firm, and Bob's deposits its cheque at the CIBC. This is a new deposit to the banking system and will allow the commercial banks to lend more b. If the CIBC has a target reserve ratio of 20 percent, it will keep $ 2000 as reserves and will lend $ 8000. c. Assuming there is no cash drain from the banking system, the ultimate effect is x$10,000 = $ in deposits in the banking system of a decrease an increasearrow_forwardSuppose that Karen deposits $500 into her checking account at the bank. The reserve requirement for Karen's bank is 15%. Assume the bank does not want to hold any excess reserves of new deposits. a. Use this information to complete the balance sheet below to show how the bank's assets and liabilities change when Karen deposits the $500. Instructions: Enter your answers as a whole number. A Simple Bank Balance Sheet Assets Change in Reserves: $ Change in Loans: $ Liabilities Change in Deposits: $ b. Why are deposits considered liabilities for a bank? O Deposits can be loaned out by the bank. O Deposits can be withdrawn at any time O The bank must pay Interest on deposits. O The bank must hold deposits as reserves at the Federal Reserve.arrow_forwardSuppose that your bank's reserve ratio is 0.2 and you deposit $50,000 into the bank. Assume that the bank loans out the maximum amount it can, and people deposit all their money. What is the deposit multiplier? What is the total increase in deposits in the banking system? What is the change in the money supply?arrow_forward
- The economy of Elmendyn contains 900 $1 bills. If people hold all money as currency, the quantity of money is . If people hold all money as demand deposits and banks maintain 100 percent reserves, the quantity of money is . If people hold equal amounts of currency and demand deposits and banks maintain 100 percent reserves, the quantity of money is . If people hold all money as demand deposits and banks maintain a reserve ratio of 12.5 percent, the quantity of money is . If people hold equal amounts of currency and demand deposits and banks maintain a reserve ratio of 12.5 percent, the quantity of money is .arrow_forwardsuppose the required reserve ratio is 11%. How much additional money can BBB lend out at a maximum? suppose the required reserve ratio is lowered to 8%. What is the Maximum amount of additional money that BBB can lend out? Is this different than the maximum amount of new money BBB can create by itself? 3. suppose the required reserve ratio is raised to 15%. What is the maximum amount of additional money BBB can lend out?arrow_forwardAssuming that banks lend all of their access reserves and people deposit all of their money, what will the Fed have to do in order to increase the supply of money by $120 billion if the Required Reserves Ratio is .20? Select one: a. It needs to buy $20 billion dollar worth of bonds from banks b. It needs to buy $24 billion dollar worth of bonds from banks c. It needs to sell $20 billion dollar worth of bonds from banks d. It needs to sell $24 billion dollar worth of bonds from banks e. It needs to sell $40 billion dollar worth of bonds from banksarrow_forward
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