In the past, the Federal Reserve (Fed) mandated that member commercial banks must hold a certain fraction of their checkable deposits in the form of bank deposits at the Fed and/or vault cash because the sum of these two accounts equals reserves. The fraction of checkable deposits that banks must hold in reserve form is called the required reserve ratio (r). Suppose no excess reserves were in the banking system and the required reserve ratio(r) was 20%. The Fedbought a government bond worth $750,000 from Raphael, a client of First Main Street Bank. Raphael deposited the money into his checking account at First Main Street Bank. Given the required reserve ratio (r), First Main Street Bank was required to hold $_______ as required reserves and could $_______ to make loans.
In the past, the Federal Reserve (Fed) mandated that member commercial banks must hold a certain fraction of their checkable deposits in the form of bank deposits at the Fed and/or vault cash because the sum of these two accounts equals reserves. The fraction of checkable deposits that banks must hold in reserve form is called the required reserve ratio (r). Suppose no excess reserves were in the banking system and the required reserve ratio(r) was 20%. The Fedbought a government bond worth $750,000 from Raphael, a client of First Main Street Bank. Raphael deposited the money into his checking account at First Main Street Bank. Given the required reserve ratio (r), First Main Street Bank was required to hold $_______ as required reserves and could $_______ to make loans.
Chapter25: Money, Banking, And The Federal Reserve System
Section: Chapter Questions
Problem 16P
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In the past, the Federal Reserve (Fed) mandated that member commercial banks must hold a certain fraction of their checkable deposits in the form of bank deposits at the Fed and/or vault cash because the sum of these two accounts equals reserves. The fraction of checkable deposits that banks must hold in reserve form is called the required reserve ratio (r).
Suppose no excess reserves were in the banking system and the required reserve ratio(r) was 20%. The Fedbought a government bond worth $750,000
from Raphael, a client of First Main Street Bank. Raphael deposited the money into his checking account at First Main Street Bank.
Given the required reserve ratio (r), First Main Street Bank was required to hold $_______ as required reserves and could $_______ to make loans.
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