Download Reserves/Reserve Requirements Review

Reserves/Reserve Requirements
Review
Assignment
• 1) If the reserve ratio is 20 percent, what are
the required reserves on a $25,000 deposit?
• 2) If the reserve ratio is 20 percent, what level
of excess reserves does a bank acquire from a
$25,000 deposit?
Use the data below to answer the next
3 questions:
•
•
•
•
Assets
Total Reserves: $15,000
Securities: $70,000
Loan: $15,000
• Liabilities
• Demand Deposits:
$100,000
• 3) What two items above are not necessary for
calculating required or excess reserves?
• 4) If the reserve requirement is 6 percent, what is
the amount of this bank’s required reserves?
• 5) If the bank does not sell any of its securities, the
maximum amount of additional lending this bank
can undertake is (excess reserves)?
Use the following scenario to answer
the next 3 questions:
• A bank has excess reserves of $10,000 and deposit
liabilities of $40,000 when the required reserve ratio is
20 percent.
• 6) Required Reserves:
• 7) Total Reserves:
• 8) If the reserve ratio is raised to 25, what will the new
required reserves be?
• 9) If the reserve ratio is raised to 25, what will the new
excess reserves be?
• 10) If the bank loans out all excess reserves from
answer #9, what is the maximum amount by which the
money supply could rise as a result?
reserve requirement = .05
• 11) The fed buys $1 in bonds
• 12) Joe deposits $1 cash into checking
• 13) Bank decides to loan out $1 in excess
reserves that it has been holding.
• FIND THE MAXIMUM POSSIBLE CHANGE IN
THE: MONEY SUPPLY, LOANS, AND DEMAND
DEPOSITS, FOR EACH SCENARIO ABOVE.
reserve requirement = .05
• 1) The fed buys $1 in bonds
• 2) Joe deposits $1 cash into checking
• 3) Bank decides to loan out $1 in excess
reserves that it has been holding.
M1
1)
2)
3)
20
19
20
L
19
19
20
DD
20
20
20
Answers
Answer Key
•
•
•
•
•
•
•
•
•
•
1) $5,000
2) $20,000
3) securities, loans
4) $6,000
5) $9,000
6) $8,000
7) $18,000
8)$10,000
9) $8,000
10) $32,000