Macroeconomics: Principles, Problems, & Policies
20th Edition
ISBN: 9780077660772
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 15, Problem 4P
To determine
Excess reserves .
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Suppose that Cat nation has $125 million in money. There is only one bank in Cat nation
and it holds 15% of the deposits as reserves. What is the money multiplier in this economy?
O 6.67
20
O 12.67
10
Suppose a banking system has a required reserve ratio of 10% and a $100,000 is deposited into the first bank in the
system. What will be the immediate excess reserves for that first bank in the system and by how much can the total money
supply in the system expand?
$70,000; 700,000.
O $100,000; $1,900,000.
$90,000, $900,000.
O $10,000; $100,000.
Suppose there is an upswing in the economy with a large demand for finance
to invest by the residential and non-residential building sector such that
lending by all banks increases by $250 billion. On the assumption the reserve
(or liquidity) ratio of banks is 12% this expansion in economic activity will
result in an endogenous increase of
O $20 billion of reserves and $230 billion of bank deposit money
O $34.1 billion of reserves and $284.1 billion of bank deposit money
O $20 billion of reserves and $270 billion of bank deposit money
O $26.2 billion of reserves and $276.2 billion of bank deposit money
Chapter 15 Solutions
Macroeconomics: Principles, Problems, & Policies
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- Suppose that a small country currently has $4 million of currency in circulation, $6 million of checkable deposits, $200 million of savings deposits, $40 million of small-denominated time deposits, and $30 million of money market mutual fund deposits. From these numbers we see that this small country's MI money supply is , while its M2 money supply is O $250 million; $270 million $210 million; $280 million $10 million; $270 million $10 million; $280 millionarrow_forward0 Question 16 Suppose the following: • Smokey Bank has total deposits of $600,000. In addition, it currently has outstanding loans in the amount of $400,000 Finally, the required reserve ratio is 15%. . . What is the money multiplier? O 0.90 0.10 090 15 O 6.67arrow_forwardAssets Liabilities Reserves $30 Deposits $1,000 Loans $970 Total $1,000 Total $1,000 The above table gives the initial balance sheet for Mega Bank. Barney comes into the bank and deposits $50 of currency into his checking account. The desired reserve ratio is 3 percent. After Barney's deposit, but before any other actions occur, MegaBank will have excess reserves of O $48.50 $50.00 O $15.00 O $33.00arrow_forward
- If Bank A has $3.8 million in total deposits, $860,000 in total reserves, and faces a 12 percent reserve requirement, the amount of money that Bank A could initially create by loaning out their excess reserves is: O $100,000. O $385,000 $404,000 O $756,800 O $3,366,667arrow_forwardQUESTION 1 If the reserve ratio is 5% then the money multiplier is? O 20; This means that for every dollar deposited into a bank account, the money supply decreases by $20. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $20. O 2. This means that for every dollar deposited into a bank account, the money supply decreases by $2. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $2.arrow_forwardIf the reserve ratio is 15 percent and a bank receives a new deposit of $1500, this bank 1) must increase its required reserves by $225. O2) will initially see its total reserves increase by $1500. 3) will be able to make a new loan of $1275. 4) All of the above are true.arrow_forward
- If a bank receiving a new deposit of $200,000 would be able, as a result, to increase their lending by at most $120,000, then the reserve requirement equals: 4%. 25%. 40% O 50%arrow_forwardBarbara Gordon withdraws $2,750 from her bank account. If the reserve requirement is 19%, by how many dollars must her bank reduce its lending? $2,227.50 $522.50 O 2,750 O $1.705arrow_forwardScenario: Assets and Liabilities of the Banking System Assets Loans Reserves Reference Ref 14-12 O $111.111 O $250,000 $900,000 100,000 O $666,667 O $1 million Liabilities Deposits (Scenario: Assets and Liabilities of the Banking System) Suppose that the reserve ratio is 10% when the Fed buys $100,000 worth of U.S. Treasury bills from the banking system. If the banking system does NOT want to hold any excess reserves. will be added to the money supply. $1,000,000arrow_forward
- Refer to the table below. Item Dollars In Billions Checkable Deposits $600 Small Time Deposits $700 Currency $500 Money-Market Mutual Funds Held by Businesses $1,200 Savings Deposits and Money-Market Deposit Accounts $2,500 Money-Market Mutual Funds Held by Individuals $800 What is the size of the M1 money supply? O $800 O $2,600 O $1,900 O $1,100arrow_forwardTable 29-4 Reserves Loans 6.0 6.4 15.6 Assets O 16.7 Bank of Pleasantville Refer to Table 29-4. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier? $3,000 Deposits 47,000 Liabilities $50,000arrow_forwardAssume that Bank A holds total reserves of $978, the required reserves are $432 and total deposit is $3,600. If the government purchases bonds worth $260 from Bank A, excess reserves of this bank will increase by O $220 O $246.40 O $227.50 $245 $228.80arrow_forward
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