Question
A bank has $55,000 of deposits, $47,000 of loans and $8,000 of reserves.The required reserve ratio is 10%, the desired excess reserve ratio is 4%,
A bank has $55,000 of deposits, $47,000 of loans and $8,000 of reserves.The required reserve ratio is 10%, the desired excess reserve ratio is 4%, and the currency ratio is 17.5%.Use this to answer questions #1 through #4.
1.What is the level of undesired excess reserves?
2.What is the level of currency in circulation?
3.What is the money multiplier? [Round off to 2 decimal places.]
4.By how much will the money supply have to change to reach equilibrium?
5.If a bank has undesired excess reserves of $325, and if rr=16%, e=8.7% and c=10%, then to restore equilibrium by how much will the money supply (M1) change?Be clear about whether this is a positive or negative change.
6.If a bank has undesired excess reserves of -$450 and where e=12%, c=35%, and m*=5.2, to restore equilibrium by how much will the money supply (M1) change?Be clear about whether this is a positive or negative change.
7.If a bank has $18,250 in deposits, and $4,500 in reserves, and if rr=15%, e=5% and c=65%, how much undesired excess reserves does the bank have?Be clear about whether this is positive or negative.
8.If a bank has $28,000 in deposits, and $3,000 in reserves, and if rr=25%, e=5% and c=30%, how much currency is in circulation?Be clear about whether this is positive or negative.
9.If a bank has undesired excess reserves of $830 and where e=7.4%, c=8.1%, and m*=4.4, what is the value of the required reserve ratio (rr)?[Round off to 2 decimal places and express in % terms, using that symbol.For example, 3.25% is good, while .0325 is not.]
10.Consider the information provided in #9 and your answer.If you also know that desired excess reserves are $2,855, what must be the level of Total Reserves?
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