Question

TABLE A: ASSETS LIABILITIES Required Reserves $288,000 Demand Deposits $1,800,000 Excess 12,000 Loans and Securities $1,500,000...

TABLE A:

ASSETS

LIABILITIES

Required Reserves $288,000

Demand Deposits $1,800,000

Excess 12,000

Loans and Securities $1,500,000

Total Assets $1,800,000

Total Liabilities $1,800,000

31. The money multiplier for the bank in TABLE A is

A) 5.

B) 10

C) 8.33

D) 6.25

32. If someone withdraws $12,000 from TABLE A, the bank will:

A) have zero excess reserves.

B) have excess reserves of $1,920.

C) have a reserve deficiency of $1,000

D) have excess reserves of $1000

Homework Answers

Answer #1

Answer: 31: D) 6.25

Steps:

1- The formula of money multiplier is :

                 money multiplier = 1 / required reserve ratio

2- We will calculate required reserve ratio:

Required reserve ratio = required reserves / deposit liabilities

Required reserve ratio = $288,000 / $1,800,000

Required reserve ratio = 0.16

3- Will put the value of required reserve ratio in the formula of money multiplier:

Money multiplier = 1/ 0.16

Money multiplier = 6.25

Answer: 32: A) have zero excess reserves.

As the bank gives loan from its excess reserves and here the excess reserve is given as 12,000 so if someone withdraws 12,000 than the bank will have zero excess reserve

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