Part 1) All banks are required to keep a certain proportion of their deposits as reserves. The proportion is called the required reserve ratio. Any amount above the required reserve is called excess reserve. We have the following information.
Checkable deposits = $125,000
Actual Reserves = $17,000
Required reserve ratio = 9%. So, it means the bank need to keep 9% of the checkable deposits as reserves.
9% of $125,000 = $11,250 (Required Reserve)
Excess Reserve = Actual Reserve – Required Reserve
Excess Reserve = $17,000 – $11,250
Excess Reserve = $5,750
Part 2) We have the following information
Checkable deposits = $120,000
Actual reserves = $16,000
Required reserve ratio = 6%. So, it means the bank need to keep 6% of the checkable deposits as reserves.
6% of $120,000 = $7,200 (Required Reserve)
The banking sector can expand the supply of money through the excess reserves.
Money Supply = Excess Reserve × Money Multiplier
Money Multiplier = 1/Required Reserve Ratio = 1/0.06 = 16.67
Excess Reserve = Actual Reserve – Required Reserve
Excess Reserve = $16,000 – $7,200
Excess Reserve = $8,800
Money Supply = Excess Reserve × Money Multiplier
Money Supply = $8,800 × 16.67
Money Supply = $146,696
Question 68 (1 point) Suppose a banking system has $ 125,000 of checkable deposits and actual...
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4. Suppose Bantam Bank has excess reserves of $8,000 and checkable deposits of $150,000. If the required reserve ratio is 20%. a. What is the size of the bank's actual reserves? b. If Bob deposits $10,000 into the bank, how much will the money supply increase? c. What is the money multiplier for this banking system?
6. If reserves in the banking system increase by $100, then checkable deposits will increase by $400 in the simple model of deposit creation when the required reserve ratio is eserve retioKeserves De posi+s 7. If the required reserve ratio is one-third, curreney in circulation is $300 billion, checkable deposits are $900 billion, and there is no excess reserve, then the MI money multiplier is 8. If the required reserve ratio is 10 percent, currency in circulation is $400 billion,...
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Suppose that Serendipity Bank has excess reserves of $14,000 and checkable deposits of $200,000. Instructions: Enter your answer as a whole number. If the reserve ratio is 10 percent, what is the size of the bank's actual reserves?
1. Suppose that currency in circulation is $600 billion, the amount of checkable deposits is $900 billion, required reserve on checkable deposits is 10% and excess reserves are $15 billion. a. Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier. Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Assuming the ratios, you calculated in...
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Suppose checkable deposits are $15 million and increase by $2 million due to an open market purchase. In addition, the required reserve ratio is 8 percent. Assuming there are no cash leakages and zero excess reserves, calculate each of the following: a. Required reserves _____________________________________ b. Excess reserves _________________________________________ c. What is the money supply due to this initial injection in the economy? _________________________ d. What is the total change in checkable deposits?_______________________________________ e. How much of this was brought...
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