a- Explain the distinction between a bank's actual reserves and its required reserves. b- Explain the...
a- Explain the distinction between a bank's actual reserves and its required reserves.
b- Explain the multiple expansion of loans and money by the entire banking system.
c-Explain the money multiplier, explain how to calculate it, and demonstrate its relevance.
Homework Answers
Hi! Welcome to Chegg!
Due to presence of Chegg policy, I am answering first question.
a.
Required reserves are the amount of funds equal to a specified percentage of the banks own deposit liabilities set by central bank.
On the other hand, actual reserves can be defined as the amount of funds banks actually keep in reserves.
Actual reserves - Required reserves = Excess reserves (if positive).
Excess reserves can never be negative because it is illegal as central bank requires banks to keep atleast required amount in reserves.
If you are satisfied with the answer, please provide a positive rating. Feel free to comment in case of queries.
Have a nice day ahead!
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Question 1 (1 point)
The amount of reserves that a commercial bank is required to
hold is equal to:
Question 1 options:
the amount of its checkable deposits.
the sum of its checkable deposits and time deposits.
its checkable deposits multiplied by the reserve
requirement.
its checkable deposits divided by its total assets.
Save
Question 2 (1 point)
Answer the question on the basis of the following information
for the Moolah Bank.
Refer to the information and assume that Moolah...
Firth Bank 5. A bank receives new reserves from the Fed equal to $300,000 and the required reserve ratio is 10 percent and the currency drain is 20 percent. Show and explain your calculations. a. What is the amount of new loans this bank can make? 300 b. What is the money multiplier? c. What is the amount of total new money created for the entire banking system?
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