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ID: 1143467 • Letter: 1
Question
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The First Bank of Fairfield
Assets
Liabilities
Reserves $2,000
Deposits $10,000
Loans 8,000
Refer to Table 16-3. The reserve ratio for this bank is
A. 0 percent.
B. 20 percent.
C. 80 percent.
D. 100 percent.
2.
Bank of Pleasantville
Assets
Liabilities
Reserves
$2,000
Deposits
$20,000
Loans
18,000
Refer to Table 16-5. Assume the Federal reserve requirement is 9 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 9 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase?
A. $555.00.
B. $1,200.00.
C. $1,777.78.
D. $2,222.22.
3.
Over one time horizon or another, Fed policy decisions influence
A. Inflation and employment
B. Inflation but not employment
C. Employment but not inflation
D. Neither inflation nor employment
1.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
The First Bank of Fairfield
Assets
Liabilities
Reserves $2,000
Deposits $10,000
Loans 8,000
Refer to Table 16-3. The reserve ratio for this bank is
Explanation / Answer
(1)B.20 percent
if the reservesis 0%, deposits-loans= 2000
if the reserves requires 20%, 2*10,000=
deposits-loans-required reserves= 20,000
(2) D 20,000 *.09=1800 so 2,00 of excess reserves 200/.09= 2222.22.
(3) A. Inflation and employment
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