/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q1. Suppose the assets of the Silver... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 15: Q1. (page 319)

Suppose the assets of the Silver Lode Bank are \(100,000 higher than on the previous day and its net worth is up to \)20,000. By how much and in what direction must its liabilities have changed from the day before?

Short Answer

Expert verified

Due to the increase in assets and net worth, the liabilities have increased to $80,000.

Step by step solution

01

Money multiplier and the required ratio

The balance sheet, to represent the true financial position, must satisfy the following equation:

Assets = Liabilities + Net worth

Therefore, a change in assets must be equal to a change in liabilities + a change in net worth.鈻�A=鈻�L+鈻�NW鈻�L=鈻�A-20000鈻�L=100000-20000鈻�L=80000

The change in liabilities is equal to $80,000. The equation needs to be balanced; thus, liabilities will increase if assets and net worth have increased. Therefore, liabilities have increased to $80,000 due to change in assets and liabilities.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

A goldsmith has \(2 million of gold in his vaults. He issues \)5 million in gold receipts. His gold holdings are what fraction of the paper money (gold receipts) he has issued?

  1. 1/10

  2. 1/5

  3. 2/5

  4. 5/5

Does leverage increase the total size of the gain or loss from an investment, or just the percentage rate of return on the part of the investment amount that was not borrowed? How would lowering leverage make the financial system more stable?

The following balance sheet is for Big Bucks Bank. The reserve ratio is 20 percent.

Assets
Liabilities and Net worth

\((1)(2)
\)(1')(2')
Reserves

Securities

Loans		22,000

38,000

40,000

Checkable deposits
1,00,000


a. What is the maximum amount of new loans that Big Bucks Bank can make? Show in columns 1 and 1鈥� how the bank鈥檚 balance sheet will appear after the bank has loaned this additional amount.

b. By how much has the money supply changed?

c. How will the bank鈥檚 balance sheet appear after checks drawn for the entire amount of the new loans have been cleared against the bank? Show the new balance sheet in columns 2 and 2鈥�.

d. Answer questions a, b, and c again, on the assumption that the reserve ratio is 15 percent.

A commercial bank has \(100 million in checkable-deposit liabilities and \)12 million in actual reserves. The required reserve ratio is 10 percent. How big are the bank鈥檚 excess reserves?

  1. \(100 million

  2. \)88 million

  3. \(12 million

  4. \)2 million

Suppose that the Fed has set the reserve ratio at 10 percent and that banks collectively have \(2 billion in excess reserves. What is the maximum amount of new checkable-deposit money that can be created by the banking system?

  1. \)0

  2. \(200 million

  3. \)2 billion

  4. $20 billion
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.