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In: Economics

Question 14 (1 point) Consider the following simplified balance sheet for a bank.  If the required reserve...

Question 14 (1 point)

Consider the following simplified balance sheet for a bank.  If the required reserve ratio is 10 percent, and the bank loans out its excess reserves, by how much will bank deposits increase?   Provide your answer in dollars measured in thousands rounded to two decimal places. Do not include any symbols, such as "$," "=," "%," or "," in your answer.

Assets

Liabilities

Reserves

$2.2 thousand

Deposits

$11.0 thousand

Your Answer:Question 14 options:

Answer

Question 15 (1 point)

Consider the following simplified balance sheet for a bank.  If the required reserve ratio is 10 percent, what is the money multiplier?   Provide your answer rounded to two decimal places. Do not include any symbols, such as "$," "=," "%," or "," in your answer.

Assets

Liabilities

Reserves

$2.3 thousand

Deposits

$8.7 thousand

Your Answer:Question 15 options:

Answer

Question 16 (1 point)

Consider the following simplified balance sheet for a bank.  Suppose the required reserve ratio decreases from 10 percent to 9 percent.   What is the new money multiplier?   Provide your answer rounded to two decimal places. Do not include any symbols, such as "$," "=," "%," or "," in your answer.

Assets

Liabilities

Reserves

$10 thousand

Deposits

$100 thousand

Your Answer:Question 16 options:

Answer

Question 17 (1 point)

Consider the following simplified balance sheet for a bank.  If the required reserve ratio is 10 percent, how much in excess reserves does the bank hold?  Provide your answer in dollars measured in thousands rounded to two decimal places. Do not include any symbols, such as "$," "=," "%," or "," in your answer.

Assets

Liabilities

Reserves

$2.1 thousand

Deposits

$8.6 thousand

Your Answer:Question 17 options:

Answer

Solutions

Expert Solution


Question 14

Deposit = $11 thousand

Required reserve ratio = 10% or 0.10

Required reserves = Deposit * rr = $11 thousand * 0.10 = $1.1 thousand

Total reserves = $2.2 thousand

Excess reserves = Total reserves - Required reserves = $2.2 thousand - $1.1 thousand = $1.1 thousand

Now, if bank loans out its excess reserves then it will make loan of $1.1 thousand.

This will lead to increase in deposit by $1.1 thousand

So,

The answer is $1.1 thousand.

Question 15

Required reserve ratio (rr) = 10% or 0.10

Calculate the money multiplier -

Money multiplier = 1/rr = 1/0.10 = 10

Thus,

The money multiplier is 10.

Question 16

Required reserve ratio decreases from 10% to 9%.

Calculate the money multiplier -

Money multiplier = 1/rr = 1/0.09 = 11.11

Thus,

The new money multiplier is 11.11.

Question 17

Deposit = $8.6 thousand

Required reserve ratio (rr) = 10% or 0.10

Required reserves = Deposit * rr = $8.6 thousand * 0.10 = $0.86 thousand

Total reserves = $2.1 thousand

Calculate the excess reserves -

Excess reserves = Total reserves - Required reserves = $2.1 thousand - $0.86 thousand = $1.24 thousand

The excess reserves that bank hold is $1.24 thousand.


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