Question
Deposits in a bank create both an asset and liability for the bank. Assume a customer deposits $10,000 into bank A. Use the table below
Deposits in a bank create both an asset and liability for the bank. Assume a customer deposits $10,000 into bank A. Use the table below to answer questions #1 through #5. BANK A ASSETS LIABILITIES reserves $10,000 checkable deposits $10,000 Assume: the required reserve ratio is = to 10% 1. Calculate required reserves _______________. 2. Calculate the excess reserves _____________ . 3. Calculate the deposit expansion multiplier ___________. 4. Calculate the maximum increase in new deposits from the initial $10,000 deposit into bank A ____________________ . 5. If the required reserve ratio changes to 5% what will happen to the banks lending ability (increase or decrease) ____________ ? 6. The use of money to pay a debt is called the ______________ money demand. The use of money to compare the relative value of different goods is called the ____________ money demand. 7. State the 4 components of the M1 definition of the money supply. 1. __________________________ 2. __________________________ 3. __________________________ 4. __________________________ 8. State the 4 components of the M2 definition of the money supply. 1. __________________________ 2. __________________________ 3. __________________________ 4. __________________________ 9. Does the United States required international banking facilities to hold required reserves ___________ ? Can international banking facilities operate in the United States ________? 10. What was the purpose of the Depository Institutions Deregulation and Monetary Control act ____________________?
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