Homework Answers
1..... b. lend out new loans.
Excess reserves refer to extra reserve over and above the minimum legal reserve requirements. These excess reserves are minimized by lending out new loans. This is a profitable use of excess reserves.
2. C. the amount of money in the circulation .
Money supply refers to cash in the circulation along with checking deposits and to some extent other deposits.
3... d. expanding the money supply.
when a lend money to a borrower, it infact creates money because a new checking deposit account is created of that amount. However we may not call it investment because it is not subjected to any market risk ( non insurable).
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Answer these 3 .will rate after
When banks find themselves with excess reserves, they typically O...
answer these will rate after If the Fed increases the discount rate, banks will face a...
answer these will rate after
If the Fed increases the discount rate, banks will face a higher cost of borrowing and will pass some of this cost onto customers in terms of higher interest rates. O it will be easier for banks to borrow the money needed to provide a higher volume of commercial loans. O it will then increase the required reserve ratio as well. O it will then decrease the required reserve ratio to offset any possible contractionary...
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
DJ. It has $559 in reserves and $9445 in loans. ? 2. The ability of banks...
DJ. It has $559 in reserves and $9445 in loans. ? 2. The ability of banks to create money has its source in which of the following A. the 100 percent reserve requirement B. fractional-reserve banking (i.e. less than 100 percent reserve requirement) C. the ability of the government to mint as much currency as it wishes D. the banks' ability to issue currency (bank notes) of their own ? 3. Which of the following items is a liability to...
Suppose the reserve ratio is 5 percent, banks do not hold excess reserves, people do not...
Suppose the reserve ratio is 5 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $20 million of government bonds. Which statement best describes the effects of Bank of Canada's purchase? O a Bank reserves increase by $20 million, and the money supply eventually decreases by $400 million Ob Bank reserves decrease by $20 million, and the money supply eventually increases by $400 million O Bank reserves decrease by $20 million,...
When can a bank make loans? a. when it has the minimum amount of required reserves...
When can a bank make loans? a. when it has the minimum amount of required reserves b. only when it is confident that it can meet all the cash needs of depositors c. only when it has deposited all cash at the Federal Reserve d. when it has reserves greater than the amount of required reserves e. There is not enough information to solve this problem. 37. In a fractional reserve banking system, banks a. are able to create money...
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...
U.S. Economy Data Value $100 Billion $50 Billion $1 Billion $30 Billion Category Total Reserves (asset...
U.S. Economy Data Value $100 Billion $50 Billion $1 Billion $30 Billion Category Total Reserves (asset for private banks, kept at Federal Reserve) Currency (assets for firms, households) Value of Euros in the U.S. (assets for private banks, firms, households, etc.) U.S. Gov't bonds (assets for private banks, firms, households, etc.) Demand deposits (liability for private banks) Corporate and consumer loans (asset for private banks) Mortgage loans (asset for private banks) Certificates of Deposit, CDs (liability for private banks) Reserve...
8. When the Fed provides funds to troubled banks that cannot find any other sources of...
8. When the Fed provides funds to troubled banks that cannot find any other sources of funds, it is acting as O A. the lender of last resort. OB. the bureau de change. O c. the Federal Deposit Insurance Corporation. OD. the interbank clearinghouse. 9. Suppose in the Republic of Sasquatch that the regulation of banking rested with the Sasquatchian Congress, including the determination of the reserve ratio. The Central Bank of Sasquatch is charged with regulating the money supply...
9 In the U.S econormy the money supply is cot A) U.S Treasury. B) Federal Reserve...
9 In the U.S econormy the money supply is cot A) U.S Treasury. B) Federal Reserve System D) Senate Committee on Banking and Finance. 10. Ceteris paribus, if the Fed raised the required reserve ratio A) Banks could increase their lending B) The Federal funds interest rate would rise. The size of the monetary multiplier would decrease. D) The size of the monetary multiplier would increase. 11. Money is created when A) Loans are made. Checks written on one bank...
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...
answer these will rate after
If the Fed increases the discount rate, banks will face a higher cost of borrowing and will pass some of this cost onto customers in terms of higher interest rates. O it will be easier for banks to borrow the money needed to provide a higher volume of commercial loans. O it will then increase the required reserve ratio as well. O it will then decrease the required reserve ratio to offset any possible contractionary...
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
DJ. It has $559 in reserves and $9445 in loans. ? 2. The ability of banks to create money has its source in which of the following A. the 100 percent reserve requirement B. fractional-reserve banking (i.e. less than 100 percent reserve requirement) C. the ability of the government to mint as much currency as it wishes D. the banks' ability to issue currency (bank notes) of their own ? 3. Which of the following items is a liability to...
Suppose the reserve ratio is 5 percent, banks do not hold excess reserves, people do not hold currency, and the Bank of Canada purchases $20 million of government bonds. Which statement best describes the effects of Bank of Canada's purchase? O a Bank reserves increase by $20 million, and the money supply eventually decreases by $400 million Ob Bank reserves decrease by $20 million, and the money supply eventually increases by $400 million O Bank reserves decrease by $20 million,...
U.S. Economy Data Value $100 Billion $50 Billion $1 Billion $30 Billion Category Total Reserves (asset for private banks, kept at Federal Reserve) Currency (assets for firms, households) Value of Euros in the U.S. (assets for private banks, firms, households, etc.) U.S. Gov't bonds (assets for private banks, firms, households, etc.) Demand deposits (liability for private banks) Corporate and consumer loans (asset for private banks) Mortgage loans (asset for private banks) Certificates of Deposit, CDs (liability for private banks) Reserve...
8. When the Fed provides funds to troubled banks that cannot find any other sources of funds, it is acting as O A. the lender of last resort. OB. the bureau de change. O c. the Federal Deposit Insurance Corporation. OD. the interbank clearinghouse. 9. Suppose in the Republic of Sasquatch that the regulation of banking rested with the Sasquatchian Congress, including the determination of the reserve ratio. The Central Bank of Sasquatch is charged with regulating the money supply...
9 In the U.S econormy the money supply is cot A) U.S Treasury. B) Federal Reserve System D) Senate Committee on Banking and Finance. 10. Ceteris paribus, if the Fed raised the required reserve ratio A) Banks could increase their lending B) The Federal funds interest rate would rise. The size of the monetary multiplier would decrease. D) The size of the monetary multiplier would increase. 11. Money is created when A) Loans are made. Checks written on one bank...
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