Question

In: Economics

suppose we have a banking system in which the public chooses to make all of its...

suppose we have a banking system in which the public chooses to make all of its purchases by using checking deposits. in addition, banks desire to maximize the reserve ratio is 20% and the FED purchases $1,000,000 in treasury bills from bank 1. explain what happens to this bank (Bank 1) and two additional steps in the deposit expansion process based on the 20% reserve requirement. Put differently, what will be the change in deposits for the first bank (Bank1) the second bank (Bank 2) and the third bank (Bank 3)

Expert Solution

Bank1:

Increase in reserve = $1000000

Decrease in treasury bills = $1000000

Change in deposits = No change

Change in total assets = No change

Change in total liability = No change

Now $1000000 will be issued as loans.

Bank 2:

Increase in Deposit = $1000000

Increase in required reserve = 1000000*20% = $200000

Increase in Excess Reserve = 1000000*(1-20%) = $800000

Now, $800000 will be issued as loans.

Bank 3:

Increase in Deposit = $800000

Increase in required reserve = 800000*20% = $160000

Increase in excess reserve = 800000*(1-20%) = $640000

Now, $640000 will be issued as loans.

Rahul Sunny answered 2 years ago

In this project, we will make up a banking system. You are an employee of MadeUp...

In this project, we will make up a banking system. You are an employee of MadeUp Banking. Your job is to manage multiple bank accounts. Here, you would create new accounts, deposit to an account, withdraw from an account, delete account, sort the accounts, or do inspection on one or all bank accounts. In order to do this job, you would need the tool for each of those items. The bank maintains a list of accounts. This list has to...

Suppose we have a face recognition system with an accuracy of 90%. Suppose it is deployed...

Suppose we have a face recognition system with an accuracy of 90%. Suppose it is deployed in a security system that observes 40 people. Compute the following probabilities ( You should write down the expression mathematically, and an R expression that returns the answer ): (a) It fails for exactly 6 people. (b) It fails for at most 2 people. (c) It fails for at least 8 people

Please answer all in microsoft word Explain the US Central Banking System and its functions. Explain...

Please answer all in microsoft word Explain the US Central Banking System and its functions. Explain the organization, how members of the board and chair are chosen, and their terms.

How is money made? This is about the banking system, and how it works to “make”...

How is money made? This is about the banking system, and how it works to “make” money. Please use words and examples or whatever you can.

If a company chooses to implement LIFO for its cost-flow assumption in its accounting system, does...

If a company chooses to implement LIFO for its cost-flow assumption in its accounting system, does this necessarily mean that the flow of the actual product out of the warehouse is being done in a "LIFO-like manner"??

1). Suppose we install a new billing system that we believe will have an average pay...

1). Suppose we install a new billing system that we believe will have an average pay cycle of 19.5 days with a standard deviation of 4.2 days. If we draw a sample of 65 invoices from the population of paid invoices at our location, with a mean paid time of 18.107 days. If the population mean is actually 19.5 days what is the probability of observing a sample from that population with a mean of 18.07 days. 2). An automaker...

Suppose that the total checkable deposits in the entire banking system of an economy is $100...

Suppose that the total checkable deposits in the entire banking system of an economy is $100 billion. The total required reserves are $10 billion. Further, banks do not hold any excess reserves, and individuals do not hold any cash in the economy. A) In this economy, if the Federal Reserve buys $10 million worth of government securities, then by how much will the money supply increase? B) Will the change in money supply be greater or lesser than what you...

We have all heard the saying, "You have one chance to make a good first impression"....

We have all heard the saying, "You have one chance to make a good first impression". If we were going to analyze this in social psychology terms, what would we say? What is the source of most of your knowledge about impression management? Minimum 300 words...thanks!

Initially, the Republic of Gorgonzola has no commercial banking system. To make trading easier and eliminate...

Initially, the Republic of Gorgonzola has no commercial banking system. To make trading easier and eliminate the need for barter, the government directs the central bank of Gorgonzola to put into circulation 4,000,000 identical paper notes, called guilders. The central bank prints the guilders and distributes them to the people. At this point the Gorgonzolan money supply is 4,000,000 million guilders. In order to keep the money safe, some Gorgonzolan entrepreneurs set up a system of commercial banks. When people...

In a periodic inventory system. My Inventory ( All purchases is 72,700). I have to make...

In a periodic inventory system. My Inventory ( All purchases is 72,700). I have to make adjusting inventory March 31, 15000 how will I enter in general journal