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Chapter 15: Q2. (page 319)
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?
\(100 million
\)88 million
\(12 million
\)2 million
The correct answer is d) $2 million.
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Third National Bank has reserves of \(20,000 and checkable deposits of \)100,000. The reserve ratio is 20 percent. Households deposit $5,000 in currency into the bank, and the bank adds that currency to its reserves. What amount of excess reserves does the bank now have?
Suppose that last year \(30 billion in new loans were extended by banks while \)50 billion in old loans were paid off by borrowers. What happened to the money supply?
Increased.
Decreased.
Stayed the same.
Explain why merchants accepted gold receipts as a means of payment even though the receipts were issued by goldsmiths, not the government. What risk did goldsmiths introduce into the payments system by issuing loans in the form of gold receipts?
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.
The actual reason that banks must hold required reserves is:
To enhance liquidity and deter bank runs
To help fund the Federal Deposit Insurance Corporation, which insures bank deposits
To give the Fed control over the lending ability of commercial banks.
To help increase the number of bank loans
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