Assume the required reserve ratio is 20%
Assets
Liabilities and net worth
Reserves 80,000
Demand Deposits 200,000
Securities 70,000
Stocks 200,000
Properties 200,000
TOTAL
400,000
400,000
If the fed buys securities from ABC B in the amount of 20,000. What will the effect be on the nation's money supply?
________________
If the fed were to increase the reserve requirement from 20% to 25%, what would happen to them:
Bank's excess reserves______________
Nation's money supply_______________
Assume the required reserve ratio is 20%
| Assets | Liabilities and net worth | |
| Reserves 80,000 | Demand Deposits 200,000 | |
| Securities 70,000 | Stocks 200,000 | |
| Properties 200,000 | ||
| TOTAL | 400,000 | 400,000 |
If the fed buys securities from ABC B in the amount of 20,000. What will the effect be on the nation's money supply?
________________
If the fed were to increase the reserve requirement from 20% to 25%, what would happen to them:
Bank's excess reserves______________
Nation's money supply_______________
Related textbook solutions
Related questions
A) If the Fed buys U.S. government securities,
| A. |
bank reserves will decrease. |
|
| B. |
the interest rate will rise. |
|
| C. |
the discount rate will rise. |
|
| D. |
the quantity of money will eventually increase. |
B) When the Fed buys U.S. government securities from a bank, the Fed pays for the securities by
| A. |
borrowing money from the U.S. Treasury. |
|
| B. |
crediting the bank's checking account at the Fed. |
|
| C. |
decreasing the amount of money in circulation. |
|
| D. |
giving the bank gold. |
C) If a banking system has $1,000 of reserves and the required reserve ratio is 50%, the maximum volume of checkable deposit liabilities of all depository institutions combined would be
| A. |
$5,000 |
|
| B. |
$2,000 |
|
| C. |
$1,000 |
|
| D. |
$500 |
D) Continuing with the scenario from the previous question, what would happen if the Fed reduced the reserve requirement from 50% to 10%?
| A. |
Reserves would fall and deposits would fall by ten times the decrease in reserves. |
|
| B. |
Reserves would fall and maximum deposits would rise. |
|
| C. |
Reserves would stay the same, and maximum deposits would rise to $10,000. |
|
| D. |
Reserves would stay the same, and maximum deposits would fall to $100. |
