Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 4, Problem 2QQ
To determine
The system of fractional reserve banking.
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Students have asked these similar questions
In a system of 100-percent-reserve banking,
a. banks do not accept deposits.
b. banks do not influence the supply of money.
c. loans are the only asset item for banks.
d. banks can increase the money supply.
Required reserves of banks are a fixed percentage of their
a.
deposits.
b.
All of these responses are correct.
c.
loans.
d.
assets.
What happens in a fractional reserve banking system? A. Bank panics cannot occur
b. The monetary system just be backed by good
c. Banks can create money through the lending process
d. The federal reserve has no control over the amount of money in circulation
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Similar questions
- A bank has a 5 percent reserve requirement, $4,000 in deposits, and has loaned out all it can given the reserve requirement. Select one: a.None of them. b.lt has $1,000 in reserves and $3,000 in loans. c.lt has $20 in reserves and $4,980 in loans. d.It has $200 in reserves and $4,800 in loans.arrow_forwardLast Bank of Panorama Springs Assets: Liabilities: Reserves $25.00 Deposits $175.00 Loans $150.00 If the reserve requirement is 12 percent, what is the state of this bank? a. It has excess reserves of more than $5000. b. It has excess reserves of less than $5000. c. It has less reserves than required. d. It can make a new loan of $17,500.arrow_forwardA bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement. a. It has $80 in reserves and $9,920 in loans. b. It has $800 in reserves and $9,200 in loans. c. It has $1,250 in reserves and $8,750 in loans. d. It has $8,000 in reserves and $2,000 in loans.arrow_forward
- The government of a small country imposes a minimum reserve ratio of 7%. If a bank within this country receives a deposit of $130,000, then: Select one: a. $9,100 should be lent out to customers and $120,900 should be held by the bank b. $120,900 should be lent out to customers and $9,100 should be held by the bank c. None of the answers are correct d. $130,000 should be fully lent to customers at 7% $130,000 should be fully lent to customers at 7% $130,000 should be fully lent to customers at 7% e. $130,000 should be held by the bankarrow_forward1. You deposit $100 of currency into your account. Explain what happens to reserves , checkabledeposits, and monetary base? 2. Explain what the shadow banking system is and how it works. 3. Your bank has the following balance sheet:Assets LiabilitiesReserves $70 million Checkable deposits $200 millionSecurities $50 millionLoans $130 million Bank capital $50 millionIf the required reserve ratio is 10%, what actions should the bank manager take if there is anunexpected deposit outflow of $50 million? Explain your answer. 4. Explain and demonstrate graphically that if the central bank pursues targeting a monetaryaggregate, it is likely to lose control over the interest rate. 5. In the market for reserves, the federal funds rate is equal to the interest rate paid on excessreserves. Explain and demonstrate graphically the effect of an open market sale on the federalfunds rate.arrow_forwardWhat a bank owes to someone else is considered part of the bank’s ________. Select one: a. liabilities b. assets c. net worth d. excess reservesarrow_forward
- If a bank has $150 million in deposits and $25 million in reserves with a reserve requirement of 0.15, million a. how much are its required reserves? million b. how much excess reserves does it have? million c. how much can it lend?arrow_forward1. The Federal Reserve a. Is the large stockpile of currency reserved for wartime uses b. May be used for Federal, but not state government uses c. Is responsible for controlling the money supply d. Was established in 1789 with the ratifying of the Constitution 2.In a system of 100% reserve banking, $100 is deposited. What is the money multiplier? a. Depends on what is withdrawn from the account b. 1 c. $100 d. There is insufficient information to state the value of the money multiplierarrow_forwardAn account issued by banks yielding a market rate of interest with a minimum balance requirement and a limit on transactions is a Select one: a. certificate of deposit. b. money market deposit account. c. savings deposit. d. time deposit.arrow_forward
- But which event will increase the quantity of deposits the banking system can create? A. An increase in the monetary base B. An increase in the currency drain C. An increase in the desired reserves by banksarrow_forwardWhat are bank reserves? a.Deposits that are held in the form of gold reserves b.The fraction of deposits kept as currency that are not used for lending purposes c.The value of the owner’s equity in the bank d.The value of investments a bank keeps in excess of the value of deposits e.The sum of all loans a bank makes to borrowersarrow_forwardA commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10 percent. The excess reserves of the bank are: Select one: a. $50,000 b. $100,000 c. $900,000 d. $1 millionarrow_forward
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