šŸ·ļø LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION ā†’
Log in
Economics
1
answer
0
watching
304
views
3 Jul 2019

When Alexis deposits money in a bank account, the bank then owes that money to Alexis. In this sense, the relationship between the bank and the customer is that of: a. principal and agent. b. two parties to a contract. c. creditor and debtor. d. payee and drawer

Watch
1
answer
0
watching
304
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Bunny Greenfelder
Bunny GreenfelderLv2
5 Jul 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Suppose that First National Bank, Second National Bank, and Third National Bank have zero excess reserves. The required reserve ratio is 20%. The Federal Reserve buys a government bond worth $1.5 million from John, a client of First National Bank. He deposits the money into his checking account at First National Bank.

Tasks:

Suppose that First National Bank loans out all its new excess reserves to Nancy, who immediately uses the funds to write a check for Mark. Mark deposits the funds immediately into his checking account at Second National Bank. Then, Second National Bank lends out all its new excess reserves to Kyle, who writes a check for Amy, who deposits the money into her account at Third National Bank. Third National Bank lends out all its new excess reserves as well.

Fill in the following table to show the effect of this ongoing chain of events at each of the banks. Enter each answer to the nearest penny.

The isolated nation of Islandia currently does not trade with other countries. The banking system of Islandia consists of four commercial banks' these banks deal with consumers and businesses and one central bank that deals exclusively with the commercial banks. The central bank has set a reserve requirement of 10 percent. The banks are creatively named First Bank, Second Bank, Third Bank, and Fourth Bank. All of the commercial banks, except First Bank, have used all of their excess reserves to issue loans to consumers and businesses. First Bank is holding $288,000 in excess reserves.

Suppose First Bank loans all of its excess reserves to a customer to buy a custom-built house. The home builder deposits all of the money received for building the house into Second Bank, which then lends all its excess reserves to a customer to buy machines for her factory. The machine manufacturer deposits all of the money received into Third Bank, which lends all its excess reserves to a clothing maker to buy textiles. The textile manufacturer deposits all of the money received into Fourth Bank, which lends all its excess reserves to a rancher to buy more cattle. By how much have these rounds of lending increased the money supply in Islandia?

Instructions: Round your answer to 2 decimal places.

Ā 

Fill in the following blanks:

The money supply consists of Currency + Checkable Deposits (NOT including currency in bank's vaults and NOT including banks' deposits at the Fed). Before the First National Bank made the $90 loan, no one outside the bank held any currency, and Checkable Deposits were equal to 100, so the money supply was equal to 0 + 100 = 100.

When the First National Bank made the loan, the borrower received $90 in cash, but checkable deposits did not fall. Thus, the money supply was equal to $ (..........)of currency in the hands of the non-bank public plus $(........) of Deposits, for a total of $(............).

While cleaning your apartment, you find a $50 bill under the sofa cushion. You deposit the $50 into your checking account. If the reserve requirement is 20%, what is the maximum amount that the money supply could ultimately increase? (Remember that the money supply is Currency + Deposits - and that the amount of Currency fell by $50 when you put the cash in the bank).

The change in currency would be (...............) and the maximum ultimate change in deposits would be at most(..............) , so the money supply would rise by at most(..........) .

Suppose you deposit the $50, but the bank chooses not to lend any of its excess reserves. By how much would the money supply ultimately increase in this case?

The change in currency would be (................) and the ultimate change in deposits would be(............) , so the money supply would rise by(...........) .

Related Documents

ECON 110 Chapter Notes - Chapter 7: Limited Partnership, Retained Earnings, Nonprofit Organization
apricottiger193
ECO100Y5 Lecture Notes - Lecture 3: Risk Premium, Credit Theory Of Money, Marginal Cost
tealspider601
ECON 110 Chapter Notes - Chapter 27: Fiat Money, Commercial Bank, Cheque Clearing
violetox690

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in