FIN-100-Week-2-Homework-Chapter-4-E2-Chapter-5-Pl-P6

There are three (3) types of textbook based homework items located at the end of each chapter. These include Discussion Questions (DQ), Exercises (E), and Problems (P). Some homework items have been custom created.

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Chapter 4: E2

Chapter 5: P1, P6

E2

As the executive of a bank or thrift institution you are faced with an intense seasonal

Demand for loans. Assuming that you loanable funds are inadequate to take care of the demand, how might your Reserve Bank help you with this problem?

 

P1

Assume that Banc One receives a primary deposit of $1 million. The bank must keep

reserves of 20 percent against its deposits. Prepare a simple balance sheet of assets and liabilities for Banc One immediately after the deposit is received.

Assets

Reserves  $200 thousand

Funds  $800 thousand

_____________________________

$1 million

Liabilities

Deposit  $1 million

_____________________________

$1 million

P6 Assume a financial system has a monetary base of $25 million. The required reserves ratio is 10 percent, and there are no leakages in the system.

A. What is the size of the money multiplier?

B. What will be the system’s money supply?