Question 45. 45. Table 16-3 . The First Bank of Fairfield Assets Liabilities Res
ID: 1168141 • Letter: Q
Question
Question 45. 45. Table 16-3.
The First Bank of Fairfield
Assets
Liabilities
Reserves $2,000
Deposits $10,000
Loans 8,000
Refer to Table 16-3. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be $320.
$400.
$680.
$750.
Assets
Liabilities
Reserves
$19,200
Deposits
$240,000
Loans
228,000
its required reserves increase by $50.
its total reserves initially increase by $1,000.
it will be able to make a new loan of up to $950.
All of the above are correct.
Assets
Liabilities
Reserves $2,000
Deposits $10,000
Loans 8,000
Explanation / Answer
The reserve ratio currently is 20% as 20% of the deposits are in reserves. If the ratio remains unchanged then the deposits of $500 will generate a reserve of $100 and the rest of $400 amount for new loans.
If bank of springfield lent out all the money it can then it can lend $12000 (240000 – 228000) which is 5% of the deposits of $240000. Hence the reserve requirement is 5%.
Mia puts money in a piggy bank so she can spend it later. This is a function of store of value of money.
Under a fractional-reserve banking system, banks generally lend out a majority of the funds deposited.
Over one time horizon or another, Fed policy decisions influence inflation and employment.
If a bank desires to hold no excess reserves, the reserve requirement is 5 percent, and it receives a new deposit of $1,000 then first the total reserves increase by $1000, then the required reserves increase by $50 as the reserve ratio is 5% and at last the bank will be able to make a new loan of $950. All of the above are correct.
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