Q4. Based on below financial statement of a commercial bank, answer following arguments by T (true) or F (false). Assume required reserve rate is 5%.

Assets	Liabilities
Reserves	$200 thousand	Demand Deposits	$1,000 thousand
Loans	$800 thousand

1. This bank owns excess reserves right now.
2. If this bank lends all excess reserves, quantity of money rises to $150 mil.
3. If one customer withdraws $ 150 mil, then excess reserves become zero.
4. If another customer deposits $200 mil, then excess reserves become $340 mil.
5. Even though this bank purchases $150 mil worth of government bonds from central bank, quantity of money does not change.

Q8. Suppose banks in a nation hold $100 million in required reserves, $25 million excess reserves, $250 million in government bonds and $1,000 million in demand deposits.

Assume all customers in this nation do not hold cash but deposits in the banks. Also all banks maintain same level of excess reserves.

1. Find amount of reserves (=required + excess )
2. What if the central bank lends $5 million to banks and banks maintain same level of required and excess reserve ratio, find quantity of money in this nation.

Answer rating: 100% (QA)

Here are the responses to each argument 1 This bank owns excess reserves right now F The banks reser... View the full answer