Imagine a country in which there are just three banks, A, B, and C, whose balance sheets
Question:
Imagine a country in which there are just three banks, A, B, and C, whose balance sheets are shown below:
BANK A | |||
Assets | $ | Capital & Liabilities | $ |
Notes and coins (Cb) | 30,000 | Shareholders’ funds (Sf) | 100,000 |
Deposit at the central bank (Db) | 50,000 | Customer deposit (Dp) | 30,000 |
Loan to the public (Lp) | 50,000 |
| - |
| 130,000 |
| 130,000 |
BANK B | |||
Assets | $ | Capital & Liabilities | $ |
Notes and coins (Cb) | 30,000 | Shareholders’ funds (Sf) | 100,000 |
Deposit at the central bank (Db) | 40,000 | Customer deposit (Dp) | 50,000 |
Loan to the public (Lp) | 80,000 |
| - |
| 150,000 |
| 150,000 |
BANK C | |||
Assets | $ | Capital & Liabilities | $ |
Notes and coins (Cb) | 30,000 | Shareholders’ funds (Sf) | 100,000 |
Deposit at the central bank (Db) | 60,000 | Customer deposit (Dp) | 40,000 |
Loan to the public (Lp) | 50,000 |
| - |
| 140,000 |
| 140,000 |
Assume that banks' customers are holding notes and coins Cp of $150,000.
Question 1. Calculate the size of the money stock.
Question 2. Calculate the reserve ratio for Bank B.
Question 3. Calculate the reserve ratio for the country.
Suppose now that bank A increases its advances (Lp) by $70,100 and its customers use this lending to pay $50,100 to clients of bank C and $20,000 to clients of bank B.
Question 4. Show the new balance sheet position for each bank.
Question 5. Calculate the reserve ratio for bank C.
Question 6. Calculate the size of the money stock.
Question 7. Calculate the reserve ratio for bank A.
Suppose now that bank C also increase its lending by $26,000 and that its customers pay $13,500 each to clients of A and $12,500 to clients of bank B.
Question 8. Show the balance sheet position for each bank.
Question 9. By how much has the money stock increased?
Question 10. Calculate the aggregate reserve ratio.
Vector Mechanics for Engineers Statics and Dynamics
ISBN: 978-0073212227
8th Edition
Authors: Ferdinand Beer, E. Russell Johnston, Jr., Elliot Eisenberg, William Clausen, David Mazurek, Phillip Cornwell