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Why does the Federal Reserve require that banks have reserves? What are excess reserves? How do...
Suppose the Federal Reserve sets the reserve requirement at 20 percent, banks hold no excess reserves, and no additional currency is held.
Excess reserves of commercial banks which are deposited with Federal Reserve Banks are referred to as: (A) discount funds (B) certificates of deposit (C) excess equity funds (D) federal funds
The Federal Reserve specifies a percentage of checkable deposits that banks hold must hold as reserves (required reserves), which is called the required reserve ratio. Excess reserves are reserves that banks hold over and above the required reserves and can make loans. Suppose that Bank A has an increase in checkable deposits of $100 million and the required reserve is 10%. How much money can Bank A create by making loans? How much money can the banking system as a...
Question 33 2 Lending temporary excess reserves held at the Federal Reserve Banks is a way that banks can partly reconcile the conflicting goals of: Stocks and flows Inputs and outputs Profit and liquidity Expansion and contraction Question 34 2 pt The multiple by which the commercial banking system can expand the supply of money is equal to: Its excess reserves The reciprocal of the discount rate The reciprocal of the reserve ratio The ratio of fixed to liquid assets...
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...
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...
Suppose the Federal Reserve sets the reserve requirement at 15 percent, banks hold no excess reserves, and no additional currency is held. Instructions: In part a, round your answer to 2 decimal place. In parts b and c, enter your answers as whole numbers. Include any negative signs if necessary. a. What is the money multiplier? b. By how much will the total money supply change if the Federal Reserve changes the amount of reserves by -$90 million? $ million c. Suppose the Federal Reserve wants to...
The predominate asset class on the Balance Sheet of the Federal Reserve Banks is: A. Reserves of Depository Institutions B. Gold and Foreign Currency held C. Currency in circulation D. Vault Cash of Depository Institutions E. U.S. Treasury Securities
If banks are currently holding zero excess reserves and the Fed raises the required-reserve ratio, which of the following will happen? Select one: a. Banks will have a reserve deficiency and will look to sell assets or securities to raise cash (reserves). b. Banks will have positive excess reserves. c. Banks will begin to extend more loans. d. Banks will begin to extend more credit. e. b and d
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 $100. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) 15 Money Supply (Dollars) Simple Money Multiplier 10 A lower reserve requirement is...