1. (2 points) Suppose a bank\'s balance sheet looks as follows: Assets Liabiliti
ID: 1113972 • Letter: 1
Question
1. (2 points) Suppose a bank's balance sheet looks as follows: Assets Liabilities Reserves Loans S 640 5,360 Deposits $6,000 and banks are required to hold reserves equal to 10 percent of deposits. (a) How much excess reserves does the bank hold? (b) How much more can this bank lend? 2. (2 points) Suppose a bank's balance sheet looks like this: Assets Liabilities Reserves Deposits $600 S 70 30 500 $600 Required Loans Total Total $600 (a) What is the required reserve ratio? (b) How much money can this bank still lend? 3. (2 points) What is the value of the money multiplier when the required reserve ratio is (a) 12.5 percent? (b) 10 percent? 4, What is a CD and what is the current rate of interest a 6 moth CD is paying, 12 month, 36 month.Explanation / Answer
Q3)
Money multiplier (m ) = i/rr
(a) rr = 12.5 = 0.125
m = 1/0.125
m = 8
(b) rr = 10% = 0.1
m= 1/0.1
m = 10
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