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Palomar College Macro Economics Balance Sheet Questions

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I need an explanation for this Macro Economics question to help me study.

  1. You are given the following balance sheet of the Summer Bank (21)

Balance sheet of the Summer bank

Assets

Liabilities

Cash $ 8,000

Deposited with the Fed $ 6,000

Loans $ 116,000

Deposits $ 80,000

Capital $ 50,000

Total $ 130,000

Total $ 130,000

The required reserve ratio (RRR) on all deposits is 5%

a. What, if any, are this bank’s excess reserves?

b. How much new amount of loan will this bank be able to create because of the excess reserves?

c. How much new amount of loan the entire banking system be able to create because of the excess reserves?

d. What would be the excess reserves of this bank after the RRR is changed to 4%?

e. How much new amount of loan will this bank be able to create with the RRR of 4%?

f. How much new amount of loan the entire banking system be able to create because of the excess reserves?

6. What is the Federal Reserve System, and what is its purpose? (8)

7. List and explain the primary tools does the Fed have for conducting monetary policy. (8)

8. What is velocity of money? List two major determinants of velocity of money. (4)

9. Assume GDP is currently $10,800 billion per year and the quantity of money is $540 billion.

a. What is the velocity of money? (4)

b. The nation collectively holds enough money to finance how many days, worth of GDP expenditure? (4)