Problem 1: Commercial Banks (5pts) 1a. (1pt) We can think of commercial banks as trading bonds...

Question

Question

Problem 1: Commercial Banks (5pts) 1a. (1pt) We can think of commercial banks as trading bonds in the economy. When a househo

business economics

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

ta)when a household puts savings in commercial bank, the bank will sell bonds to household.

tb)when a firm takes loan from commercial bank, the bank will sell bond to the firm.

tc)Commercial banks play an important role in contributing to country' s GDP .

People save a part of their disposable income and deposit in banks.Banks mobilise savings and channelize them into productive investment .,by lending to producing firms.The more production by firms ,the more is Country's GDP.

If banks disappeared, there would be fall in investment expenditure, which will lead to less employment opportunities, less income ,less consumption and finally very low GDP of country.

td)The reserve demand from commercial banks will be 10 billion dollars.

te)The checkable deposit demand by households is 7 trillion dollars

Add a comment

Answer 2

Similar Homework Help Questions

Problem 1: Commercial Banks (5pts) 1a. (1pt) We can think of commercial banks as trading bonds...

Problem 1: Commercial Banks (5pts) 1a. (1pt) We can think of commercial banks as trading bonds in the economy. When a household puts their savings in a commercial bank, does the commercial bank sell bonds to the household or buy bonds from the household? 1b. (1pt) We can think of commercial banks as trading bonds in the economy. When a firm takes a loan from a commercial bank, does the commercial bank sell bonds to the firm or buy bonds...
Total reserves (private banks) $100 billion, Currency (firms, households) $50 billion, Value of Euros in the...

Total reserves (private banks) $100 billion, Currency (firms, households) $50 billion, Value of Euros in the U.S. (private banks, firms, households) $1 billion; Gov't bonds (private banks, firms, households) $30 billion; demand deposits (Private banks) $1 trillion; Certificates of deposit, CDs (private banks) $10 billion; Reserve requirement on demand deposits 0.10. Question: what is the money supply (M1) and the amount of reserves that banks are required to keep? Thanks, Kiki
Let’s say the Federal Reserve buys $20 Billion in bonds from private banks: *Total reserve requirement...

Let’s say the Federal Reserve buys $20 Billion in bonds from private banks: *Total reserve requirement = 0.10 x $1Trillion = $100 Billion What is the total amount (in $) of reserves that banks can lend? Using the simple deposit multiplier, how much additional money (M1) is created by this process? What will happen to the Federal Funds Rate, the prime rate, and other nominal interest rates in the economy? (Go up, down, stay the same?) Why? If the price...

Which of the following would increase the money supply? Multiple Choice Commercial banks use excess reserves...

Which of the following would increase the money supply? Multiple Choice Commercial banks use excess reserves to buy government bonds from the Federal Reserve. Commercial banks sell government bonds to the Federal Reserve. Commercial banks loan out excess reserves O A check clears from Bank A to Bank B. < Prey 5 of 35
When the Federal Reserve purchases government treasury bonds from commercial banks, we can expect interest rates...

When the Federal Reserve purchases government treasury bonds from commercial banks, we can expect interest rates in the economy to _______. As a result, spending by firms and households is likely to _______.
Problem #4 Consider a simple economy in which money supply (think of M1) is determined through...

Problem #4 Consider a simple economy in which money supply (think of M1) is determined through actions of the central bank, non-bank public, and commercial banks. Assume that the central bank influences the size of the monetary base and the public and commercial banks decide on the value of deposits and excess reserves. i)Imagine that in a given point in time the value of the monetary base is equal to 100, the public chooses not to hold any currency, and...

The reserve requirement sets the required percentage of vault cash plus deposits with the regional Federal...

The reserve requirement sets the required percentage of vault cash plus deposits with the regional Federal Reserve Banks that banks must keep for their deposits. Many banks have widespread branches and ATMs. How would the existence of branches and ATMs affect the level of excess reserves (above those required) that banks are able to hold? ATMs require a lot of vault cash, thus increasing excess reserves. ATMs increase excess reserves, which increases the money multiplier. The existence of ATMs does...
Assume that banks do not hold excess reserves and that households do not hold currency

Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $400. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. A higher reserve requirement is associated with a _______ money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that...
Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits.

8. The reserve requirement, open market operations, and the moneysupply Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $400. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. A higher reserve requirement is associated with a _______ money supply. Suppose the Federal Reserve wants to increase the...

1.67 pts When the Federal Reserve purchases government treasury bonds from commercial banks, we can expect...

1.67 pts When the Federal Reserve purchases government treasury bonds from commercial banks, we can expect interest rates in the economy to As a result, spending by firms and households is likely to decrease : increase increase : increase increase : decrease decrease : decrease

Problem 1: Commercial Banks (5pts) 1a. (1pt) We can think of commercial banks as trading bonds...

Homework Answers

Add Answer to:
Problem 1: Commercial Banks (5pts) 1a. (1pt) We can think of commercial banks as trading bonds...

Post as a guest

Earn Coins