ECONOMICS:PRIN.+POLICY-MINDTAP (1 TERM)
14th Edition
ISBN: 9781337912396
Author: Baumol
Publisher: CENGAGE L
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Chapter 28, Problem 6DQ
To determine
The reason for bankers would not like to hold
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ECONOMICS:PRIN.+POLICY-MINDTAP (1 TERM)
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- If a bank has total reserves of $200,000 and $1 million in deposits, how much money can it lend if the required reserve ratio is (a) 4 percent? (b) 6 percent?arrow_forwardHow would a rise in interest rate affect a bank’s profit?arrow_forwardWhy does the firm have to borrow the bank's liability rather than use its own? Explain briefly.arrow_forward
- what if the Bank of Cheap Loans tries to charge an even lower rate?arrow_forwardShould banks have to hold 100% of their deposits? Why or why not?arrow_forwardIf federal deposit insurance is provided to banks at no cost to them, who pays when an insured depository institution fails and its depositors are reimbursed for the full amount of their deposits?arrow_forward
- Excess reserves are insurance from deposit outflow. Suppose you hold 15 million required reserves and 45 million excess reserves at the central bank. The total interest payment on reserves from the central bank is 0.3%. If you do not hold your excess reserves at the bank, you may take loans and earn 4% in average. What is the cost of holding excess reserve at the central bank?arrow_forwardIs Islamic banking really different from conventional?arrow_forwardWhy do loan sharks worry less about moral hazard in connection with their borrowers than some other lenders do?arrow_forward
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