#### Description of this paper

##### Finance Multiple Misc. Questions with Solution

Description

solution

Question

Question;1. A new bank has vault cash of;\$1 million and \$5 million in deposits held at its Federal Reserve District;Bank.;a. If the required reserves ratio;is 8 percent, what dollar amount of deposits can the bank have?;b. If the bank holds \$65 million;in deposits and currently holds bank reserves such that excess reserves are;zero, what required reserves ratio is implied?;3. A bank has \$110 million in;deposits and holds \$10 million in vault cash.;a. If the required reserves ratio;is 10 percent, what dollar amount of reserves must be held at the Reserve Bank?;b. How would your answer in Part;(a) change if the required reserves ratio was increased to 12 percent?;5. The Friendly National Bank;holds \$50 million in reserves at its Federal Reserve District Bank. The required;reserves ratio is 12 percent.;a. If the bank has \$600 million;in deposits, what amount of vault cash would be needed for the bank to be in;compliance with the required reserves ratio?;b. If the bank holds \$10 million;in vault cash, determine the required reserves ratio that would be needed for;the bank to avoid a reserves defi cit.;c. If the Friendly National Bank;experiences a required reserves defi cit, what actions can it take to be in;compliance with the existing required reserves ratio?;5. The SIMPLEX fi nancial system;is characterized by a required reserves ratio of 11 percent, initial excess;reserves are \$1 million, and there are no currency or other leakages.;a. What would be the maximum;amount of checkable deposits after deposit expansion, and what would be the;money multiplier?;b. How would your answer in (a);change if the reserve requirement had been 9 percent?;6. Assume a fi nancial system has;a monetary base (MB) of \$25 million. The required reserves ratio is 10 percent;and no leakages are in the system.;a. What is the size of the money;multiplier (m)?;b. What will be the system?s;money supply?;8. The BASIC fi nancial system;has a required reserves ratio of 15 percent, initial excess reserves are \$5;million, cash held by the public is \$1 million and is expected to stay at that;level, and no other leakages;or adjustments are in the system.;a. What would be the money;multiplier and the maximum amount of checkable deposits?;b. What would be the money supply;amount in this system after deposit expansion?;10. The COMPLEX fi nancial system;has these relationships: The ratio of reserves to total deposits is 12 percent;and the ratio of noncheckable deposits to checkable deposits is 40 percent. In;addition, currency held by the nonbank public amounts to 15 percent of checkable;deposits. The ratio of government deposits to checkable deposits is 8 percent;and the monetary base is \$300 million.;a. Determine the size of the M1;money multiplier and the size of the money supply.;b. If the ratio of currency in;circulation to checkable deposits were to drop to 13 percent while the other;ratios remained the same, what would be the impact on the money supply?;c. If the ratio of government;deposits to checkable deposits increases to 10 percent while the other ratios;remained the same, what would be the impact on the money supply?;d. What would happen to the money;supply if the reserve requirement increased to 14 percent while noncheckable deposits;to checkable deposits fell to 35 percent? Assume the other ratios remain as;originally stated.

Paper#49902 | Written in 18-Jul-2015

Price : \$20