Question

In: Economics

A bank has ​$255 million in total​ reserves, of which ​$11 million are excess reserves. The...

A bank has ​$255 million in total​ reserves, of which ​$11 million are excess reserves. The bank currently has ​$3 comma 667 million in​ loans, ​$1,000 million in​ securities, and ​$131 million in other assets. The required reserve ratio for transactions deposits is 10 percent.

Calculate the sum of this​ bank's total amount of liabilities and net worth ​

Calculate the additional amount of loans this bank can make to households and firms.

Calculate the current quantity of transactions deposits at this bank

Solutions

Expert Solution

Part 1

Calculate Total assets -

Total assets = Total reserves + Loans + Securities + Other assets

Total assets = $255 million + $3,667 million + $1,000 million + $131 million

Total assets = $5,053 million

The total assets is $5,053 million

The total assets equals the sum of the total amount of liabilities and net worth.

So,

The sum of this bank's total amount of liabilities and net worth is $5,053 million.

Part 2

A bank can make loan up to the excess reserves it held.

The excess reserves with bank are $11 million.

Thus,

The additional amount of loans this bank can make to households and firms is $11 million.

Part 3

Total reserves = $255 million

Excess reserves = $11 million

Required reserves = Total reserves - Excess reserves

Required reserves = $255 million - $11 million

Required reserves = $244 million

Required reserve ratio = 10% or 0.10

Calculate the quantity of transaction deposits -

Transaction deposits = Required reserves/Required reserve ratio

Transaction deposits = $244 million/0.10 = $2,440 million

Thus,

The current quantity of transactions deposits at this bank is $2,440 million.

Rahul Sunny answered 5 months ago
Next > < Previous

Related Solutions

  If a bank that desires to hold no excess reserves and has just enough reserves...
  If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a Selected Answer: c. $510 increase in excess reserves and a $90 increase in required reserves. Answers: a. $600 increase in required reserves and no increase in excess reserves.   b. $600 increase in excess reserves and no increase in required reserves.   c. $510 increase in excess...
If a bank has $10 million in total deposits from customers, holds $3 million in reserves,...
If a bank has $10 million in total deposits from customers, holds $3 million in reserves, and has a reserve requirement of 20% imposed by the Fed, which statement is TRUE? The bank's reserve ratio is 20%, and the bank is fully loaned-up. The bank's reserve ratio is 30%, and the bank is not fully loaned-up. The bank's reserve ratio is 20%, and the bank is not fully loaned-up. The bank's reserve ratio is 30%, and the bank is fully...
True or False. In Canada, if a commercial bank has no “excess reserves” to lend out...
True or False. In Canada, if a commercial bank has no “excess reserves” to lend out and a creditworthy customer asks the bank for a loan, then the bank must refuse the customer’s request for a loan. Briefly explain. When the Bank of Canada lowers its target for the overnight interest rate (policy rate) the result is a lowering of the nominal interest rate on money market instruments. Under what circumstances will a reduction in the BOC policy rate lead...
Assume the required reserve ratio is 5%, and a bank’s excess reserves are $50 million. Which...
Assume the required reserve ratio is 5%, and a bank’s excess reserves are $50 million. Which of the following accurately explain why checkable deposits resulting from new loans based on excess reserves are not likely to generate the maximum of $50 million×20=$1,000 million$50 million×20=$1,000 million? Check all that apply. Cash leakage increases the value of the money multiplier. Cash leakage reduces the value of the money multiplier. Banks not using all their excess reserves to make loans increases the value...
Assume that a bank has $12 million in reserves and checkable deposits of $10 million and...
Assume that a bank has $12 million in reserves and checkable deposits of $10 million and the required reserve ratio is 10%. The maximum amount of loans this bank can make is-
Excess reserves
Excess reserves
What are excess reserves? What are the factors that determine how much a bank would like to hold in excess reserves? Briefly explain.
A. What are excess reserves? What are the factors that determine how much a bank would like to hold in excess reserves? Briefly explain.B> One morning the Open Market Account Manager at the New York Federal Reserve Bank observes that the equilibrium (market) federal funds rate is 3.25%. Suppose the target federal funds rate is 2.5%. What does this indicate about total reserves in the banking system? What would the Account Manager decide to do (open market purchase or open...
The bank of Zambia is discussing the possibility of paying interest on excess reserves . If...
The bank of Zambia is discussing the possibility of paying interest on excess reserves . If it occurs , what will happen to the level of excess reserves to deposits ratio?
Consider a bank whose total loans are equal to $800 million and required reserves are $40...
Consider a bank whose total loans are equal to $800 million and required reserves are $40 million. The reserve requirement is 10%. a) Fill in the bank’s balance sheet, assuming that it does not hold excess reserves. Loans = $___ million; Required reserves = $___ million Deposits = $___ million; Net worth = $___ million Total assets = $___ million b) The value of the money multiplier is .____ It depends_____on the reserve ratio (type in negatively or positively). c)...
Bank 1 received a deposit of SR1 million. Assuming that the banks retain no excess reserves, answer the following questions:
Bank 1 received a deposit of SR1 million. Assuming that the banks retain no excess reserves, answer the following questions: The reserve requirement is 25 percent.Fill in the blanks in the table below.What is the deposit multiplier?Multiple Deposit CreationRoundDepositsReservesLoansBank 1Bank2Bank3Bank 4Bank5All other banksTotalsSR1, 000,000SRSRNow the reserve requirement is 5 percent.Fill in the blanks in the similar table.What is the deposit multiplier?Multiple Deposit CreationRoundDepositsReservesLoansBank 1Bank2Bank3Bank 4Bank5All other banksTotalsSR1, 000,000SRSR
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT