EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 33, Problem 3DQ
To determine
Commercial bank's assets, liabilities and balance sheet .
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Students have asked these similar questions
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 million
Reserves
Loans
=
A. 250/0.16 $1,562.5
B. 300/0.16 $1,875
C. 500/0.17 = $2,941.18
D. 300/0.196= $1,530.61
O E. not enough information to determine
=
Bank North's Balance Sheet
Assets
$300 Deposits
Capital
$1,800
$2,100
Refer to the table above. Assume that Bank North is operating at its target reserve ratio and has no excess reserves, and
that all commercial banks have the same target reserve ratio. If a new deposit to the Canadian banking system of $500 is
deposited at Bank North, the total new deposits created in the banking system can be calculated as follows:
Liabilities
$1,800
$300
$2,100
Assume 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
$228.80
Chapter 33 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
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- 0 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_forwardSuppose the value of a bank's variable-rate assets is_______ million, and the value of its variable-rate liabilities is $100 million. Since this bank has a negative gap, in market interest rates will decrease bank profits. Select one: O $150; an increase O $150; a decrease $50; a decrease $50; an increasearrow_forwardSuppose 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.arrow_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_forwardSuppose 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 moneyarrow_forwardA bank has £2 million assets and £1.8 million liabilities. What is the percentage fall in the asset value that will render the bank insolvent? O 7% O 8% O Greater than 10%arrow_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_forwardWhich of the following statements is true about bonds? 1) A bond's dollar price is calculated as a growth rate. 2) The dollar price and interest rate of a bond have a positive relationship. 3) Bonds can never default. 4) The dollar price and interest rate of a bond have an inverse relationship. 5) Bonds are ownership shares in a firm.arrow_forwardItem Dollars Checkable Deposits Small Time Deposits Currency Money-Market Mutual Funds Held by Businesses Savings Deposits and Money-Market Deposit Accounts Money-Market Mutual Funds Held by Individuals In Billions $600 $700 $500 $1,200 $2,500 $800 What is the size of the M1 money supply? O $800 O $1,900 O $1,100 O $2,600arrow_forward
- 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 10arrow_forwardIf 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_forwardIf the reserve ratio for the bank below is 25%, is the bank current over or under reserved at by how much? Assets Liabilities/Equity Demand Deposits Reserves Loans Shareholders' equity Securities Fixed assets Total $50 250 150 50 500 Select one: O a. Over-reserved by $100 O b. Neither over or under-reserved O c. Over-reserved by $50 O d. Under-reserved by $50 e. Under-reserved by $100 Total $400 100 500arrow_forward
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