HomeworkLib
Question

Reserves Liabilities $19,200 Deposits $240,000 220.800 Loans Refer to Table 1. Assume the Fed's new reserve...

Reserves Liabilities $19,200 Deposits $240,000 220.800 Loans Refer to Table 1. Assume the Fed's new reserve requirement is 6 percent and that the Bank of Springfield makes new loans so as to make their required reserves just 6 percent of their deposits , From then on no bank holds any excess reserves . Assume also that people hold only deposits and no currency . By what amount does the economy's money supply increase because of the the new loans? Select one: 2. \$80,000 O b \$50,200 $72,000 d. \$106,000
business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer:

Given:

Reserve requirement = 6% = .06

Money multiplier = 1/0.06 = 16.67

Reserve requirement = 6 % of Deposits = 6% of 240,000 = 14400

Excess Reserve = Reserves Liabilities - Reserve requirement = 19200 - 14400 = 4800

Change in money supply = Change in reserves x money multiplier

Change money supply = 4800 x 16.67 = 80000

Money supply increases by 80000

Hence Correct option is A] 80,000

0 0
Add a comment
Know the answer?
Add Answer to:
Reserves Liabilities $19,200 Deposits $240,000 220.800 Loans Refer to Table 1. Assume the Fed's new reserve...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Bank of Springfield Assets Liabilities Reserves $19,800 Deposits $180,000 Loans 160,200 Refer to Table 29-7. If...

    Bank of Springfield Assets Liabilities Reserves $19,800 Deposits $180,000 Loans 160,200 Refer to Table 29-7. If the Bank of Springfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

  • Assets Reserves Loans Liabilities $3,000 Deposits $450 $2,550 The required reserve ratio is 12 percent. Given...

    Assets Reserves Loans Liabilities $3,000 Deposits $450 $2,550 The required reserve ratio is 12 percent. Given its deposits of $3,000, the bank is required to hold $ 360 as reserves. (Enter your response as an integer.) The bank holds excess reserves of $ 90. (Enter your response as an integer.) The bank can increase its loans by $ 750 . (Round your response to two decimal places.) Suppose a depositor comes to the bank and withdraws $200 in cash. Show...

  • Refer to the following table to answer the questions that follows: Assets: Liabilities: Deposits $1000 Reserves...

    Refer to the following table to answer the questions that follows: Assets: Liabilities: Deposits $1000 Reserves $100 Loans $900 Assume that the is holding the required percent of deposits as reserves. Also, assume all other banks hold only the required percent of deposits as reserves, and that people hold only deposits and no currency. What is the money multiplier? 10 If the Bank has loaned out all the money it wants, given its deposits, what is its reserve ratio?

  • Assets Liabilities Loans Deposits $65 million Required Reserves Excess Reserves $2 million Treasury Securities $5 million...

    Assets Liabilities Loans Deposits $65 million Required Reserves Excess Reserves $2 million Treasury Securities $5 million The Fed sets a reserve requirement of 3% on deposits between $16 million and $122 million. If the bank holds $5 million dollars in US Treasury Securities and $2 million in excess reserves, compute the bank’s required reserve level and the quantity of loans this bank is able to make to the public. What is the value of the money multiplier? [Money Multiplier =...

  • 1.The sum of the Fed's monetary liabilities and the U.S. Treasurry's monetary liabilities is called A)...

    1.The sum of the Fed's monetary liabilities and the U.S. Treasurry's monetary liabilities is called A) the money supply. B) currency in circulation. C) the monetary base. D) bank reserves D) balk eserves 2. If a bank has excess reserves of $10,000 and demand deposit liabilities of $80,000, and if the reserve requirement is 20 percent, then the bank has actual reserves of A) $26,000. B) $20,000 C) $6,000. D) $16,000. E) $36,000 3. A bank has excess reserves of...

  • QUESTION 1 0.8 points Saved Assets Liabilities Reserves $100 Loans T-Bills Deposits S1,000 800 100 Refer...

    QUESTION 1 0.8 points Saved Assets Liabilities Reserves $100 Loans T-Bills Deposits S1,000 800 100 Refer to this scenario for all of the questions on this problem set Suppose the balance sheet shown is for the only bank in the banking system. The reserve requirement is 10%. If the Fed buys $50 worth of T-bills from this bank, immediately after that exchange, before the bank expands its lending in response, the bank's reserves would equal 150 QUESTION 2 0.8 points...

  • - + Automatie Zoom : Exhibit 1: Bountiful Bank Assets Liabilities $400,000 Reserves Loans Deposits $...

    - + Automatie Zoom : Exhibit 1: Bountiful Bank Assets Liabilities $400,000 Reserves Loans Deposits $ 50,000 $350,000 3. Use the balance sheet in Exhibit 1. Suppose the reserve requirement for this bank, Bountiful Bank, is 10 percent. Which of the following statements is (are) correct? (x) Given its current reserves amount, Bountiful Bank is in a position to make a new loan of $10,000 (y) Bountiful Bank has excess reserves in an amount that is more than $9,500 (z)...

  • Bank of Delta has $120 in reserves, $520 in loans and checkable deposits of $640. Assume...

    Bank of Delta has $120 in reserves, $520 in loans and checkable deposits of $640. Assume the required reserve ratio is 9%. A new customer deposits $110 in a checking account. After the bank receives this new deposit, the bank transforms all its excess reserves into loans and consequently, the bank has total loans of? $682.5 $633 $605.5 $595

  • Exhibit 13-1 Exhibit 13-1 Bank Increase in Checkable Deposits New Required Reserves New Checkable Deposits Created...

    Exhibit 13-1 Exhibit 13-1 Bank Increase in Checkable Deposits New Required Reserves New Checkable Deposits Created by Extending New Loans A $0 $0 $1,000 B $1,000 (A) (B) C (C) $90 (D) D $810 (E) (F) ​ Assume that the required reserve ratio is 10%, that there are no cash leakages, and that banks hold zero excess reserves. Refer to Exhibit 13-1.  Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A....

  • 1) Suppose the Fed's required reserve ratio (REQ) is 20%. Further suppose that the Fed buys...

    1) Suppose the Fed's required reserve ratio (REQ) is 20%. Further suppose that the Fed buys $100 million of U.S. Treasury securities from a dealer, Mary Jones, who deposits the check, which is drawn on the Fed, in her bank. This deposit increases her bank's reserve account (∆R) with the Fed by $100 million as well as its demand deposits, its total reserves, and the overall level of M1. What is the money multiplier?1) Suppose the Fed's required reserve ratio...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT