suppose the central bank of boxtown requires victorian bank to hold 15% of its deposits as...

suppose the central bank of boxtown requires victorian bank to hold 15% of its deposits as reserves. if kevin deposits 7500 in victorian bank, what is the maximum amount of their deposit that victorian bank can lend

Expert Solution

The maximum amount of their deposit that Victorian bank can lend = 6,375

Explanation:

Step 1:

Calculate the amount the bank will keep as required reserves:

Amount the bank will keep = Required reserves x deposit amount

= 15% x 7,500

= 1,125

Step 2:

Calculate the maximum amount of the deposit the bank can lend:

Maximum amount the bank can lend = Deposit amount - Amount the bank will keep as required reserves

= 7,500 - 1,125

= 6,375

Rahul Sunny answered 2 years ago

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A...

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves? Selected Answer: c. $27,000 Answers: a. $9,000 b. $26,190 c. $27,000

1.Why does the central bank of a nation hold official reserve assets? What are its major...

1.Why does the central bank of a nation hold official reserve assets? What are its major components?

Use the following information about Macroland to answer this question Bank deposits at the central bank...

Use the following information about Macroland to answer this question Bank deposits at the central bank $100 million Currency in bank vaults $50 million Currency held by the public 75 million Chequeable deposits 600 million Traveller cheques 5 million a) What are bank reserves equal to in Macroland? b) Suppose banks hold no excess reserves in Macroland? What is required reserves ratio given the information in this table? c) If the public does not change its currency holdings, what will...

Suppose that a bank estimates its total deposits for the next four months in millions of...

Suppose that a bank estimates its total deposits for the next four months in millions of dollars to be, respectively, $112, $132, $121, and $147, while its loans (also in millions of dollars) will total an estimated $87, $95, $102, and $113, respectively, over the same four months. Under the sources and uses of funds approach, when does this bank face liquidity deficits, if any?

Consider an economy with a constant population in which people wish to hold bank checking deposits...

Consider an economy with a constant population in which people wish to hold bank checking deposits worth a total of 7,000 goods in every period. The economy has a total endowment of 15,000 goods in each period. There is a total stock of unintermediated capital of 2,000 goods in each period. Bank deposits are the only form of money in the economy. Deposits at banks are subject to a reserve requirement of 15%. The net real rate of return to...

Suppose in an economy which is producing at its potential output, the central bank decides to...

Suppose in an economy which is producing at its potential output, the central bank decides to implement an expansionary monetary policy. Using the AD-AS model, explain the effect that this policy will have in the short run, and in the long run. Illustrate your answer with a diagram.

Suppose that we define money as the sum of currency and demand deposits. If people hold...

Suppose that we define money as the sum of currency and demand deposits. If people hold equal amounts of currency and demand deposits and banks maintain a reserve ratio of 10 percent, what is the size of money multiplier? a. 1.8 b. 10 c. 2.5 d. 5 the answer is (a) but i don't know why

If bank depositors hold more cash and fewer deposits, the monetary base does not change, only...

If bank depositors hold more cash and fewer deposits, the monetary base does not change, only the composition of it does. Explain why in your own words. 300 words

Assume a bank experienced a big deposits outflow and does not hold enough required reserves due...

Assume a bank experienced a big deposits outflow and does not hold enough required reserves due to its poor liquidity management. What can the bank do to raise funds and meet the required reserve amount in a short time period? Discuss the potential cost associated with these activities.

Assume a bank experienced a big deposits outflow and does not hold enough required reserves due...

Assume a bank experienced a big deposits outflow and does not hold enough required reserves due to its poor liquidity management. What can the bank do to raise funds and meet the required reserve amount in a short time period? Discuss the potential cost associated with these activities.

Question

suppose the central bank of boxtown requires victorian bank to hold 15% of its deposits as...

Solutions

Expert Solution

Related Solutions

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A...

1.Why does the central bank of a nation hold official reserve assets? What are its major...

Use the following information about Macroland to answer this question Bank deposits at the central bank...

Suppose that a bank estimates its total deposits for the next four months in millions of...

Consider an economy with a constant population in which people wish to hold bank checking deposits...

Suppose in an economy which is producing at its potential output, the central bank decides to...

Suppose that we define money as the sum of currency and demand deposits. If people hold...

If bank depositors hold more cash and fewer deposits, the monetary base does not change, only...

Assume a bank experienced a big deposits outflow and does not hold enough required reserves due...

Assume a bank experienced a big deposits outflow and does not hold enough required reserves due...