Which of the following describe a common factor behind the occurrence of bank runs? Check all that apply. Even a healthy bank does not keep reserves on hand to cover all of its checking account liabilities. Financial institutions have little concern regarding their soundness. Rumors that a bank is in financial trouble spread easily. Which of the following are reasons why bank panics were largely eliminated after 1933? Check all that apply. State-chartered banks are freer from the Fed's regulations. The Federal Reserve ("the Fed") stands ready to inject reserves into the system more quickly in a crisis. The Fed and other government agencies continuously monitor the financial condition of banks.

Which of the following describe a common factor behind the occurrence of bank runs? Check all that apply. Even a healthy bank does not keep reserves on hand to cover all of its checking account liabilities. Financial institutions have little concern regarding their soundness. Rumors that a bank is in financial trouble spread easily. Which of the following are reasons why bank panics were largely eliminated after 1933? Check all that apply. State-chartered banks are freer from the Fed's regulations. The Federal Reserve ("the Fed") stands ready to inject reserves into the system more quickly in a crisis. The Fed and other government agencies continuously monitor the financial condition of banks.

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Monetary System

Section: Chapter Questions

Problem 5PA

See similar textbooks

Similar questions

The term moral hazard describes increases in risky behavior resulting from efforts to make that behavior safer. How does the concept of moral hazard apply to deposit insurance and other bank regulations?
In a program of deposit insurance as it is operated in the United States, what is being insured and who pays the insurance premiums?
How is a central bank different from a typical commercial bank?
What is the risk if a bank does not diversify its loans?
In government programs of bank supervision, what is being supervised?
Suppose the Fed conducts an open market sale by selling $10 million in Treasury bonds to Acme Bank. Sketch out the balance sheet changes that will occur as Acme restores its required reserves (10% of deposits) by reducing its loans. The initial balance sheet for Acme Bank contains the following information: Assets - reserves 30, bonds 50, and loans 250; Liabilities - deposits 300 and equity 30.
12. You are given this account for a bank: ASSETS LIABILITIES Reserves $ 500 $3,500 Deposits Loans 3,000 The required reserve ratio is 10 percent. a. How much is the bank required to hold as reserves given its deposits of $3,500? b. How much are its excess reserves? 16 c. By how much can the bank increase its loans? d. Suppose a depositor comes to the bank and withdraws $200 in cash. Show the bank's new balance sheet, assuming the bank obtains the cash by drawing down its reserves. Does the bank now hold excess reserves? Is it meeting the required reserve ratio? If not, what can it do?
4. The combined balance sheet of all the commercial banks in the economy is as follows (in billions of dollars): Assets Liabilities Reserves 25 Deposits 250 Government Securities 75 Loans 150 a) Assume this bank has no excess reserves, what is the reserve requirement? b) If the Fed purchases securities of $25 billion, how much in excess reserves do the banks have immediately after this transaction? c) By how much would the money supply increase if the banks fully utilized their lending capacity capacity and all money lent was redeposited into the banking system? hp
11. Macroland has a very simple banking system, in which there is only one chartered bank (The First Bank). The government of Macroland imposes a minimum required reserve ratio of 3%. Individuals in Macroland hold a fixed amount of $1200 in the form cash to facilitate their daily transactions and will deposit any excess amount of money into their bank accounts. The initial balance sheet of the First Bank is as follows: Assets Liabilities & Equity Reserves $255 Chequable deposits $7500 Loans $7400 Shareholder equity $155 Note: Unless otherwise stated, the First Bank will hold the excess reserves fixed at the current level as shown in the initial balance sheet and will lend out any surplus of reserves beyond this. a. Find the required reserves and the excess reserves held by the First Bank. b. Suppose there is a change in money demand such that people increase their cash holdings by $45 by withdrawing cash from their bank accounts. By how much will the money supply change? c. Return to…
35. "Too-big-to-fail" A) is a good policy because it ensures that large banks will not go out of business. B) helps reduce moral hazard in banking. C) is a consequence of safety net policies that encourage larger banks to take on more risk. D) has been an issue in the U.S. banking system since the National Bank Act of 1863. 36. The reduction in the number of U.S. banks that has occurred since the mid 1990's has been due primarily to A) bank failures from increased competition. B) voluntary bank mergers to take advantage of cost efficiencies. C) the closing of banks by federal regulators. D) elimination of state banks since all banks must now be nationally chartered. 37. Capital requirements for banks A) are specified by the Glass-Steagall act of 1933 B) increase moral hazard in banking. C) encourage banks to limit their holding of risky assets by putting some of the banks' own money at risk. D) specify the type of collateral (capital) that can be accepted to back up a bank loan. 38.…
9. Commercial banks:a) implement monetary policy.b) are nonprofit organizations that lend and borrow funds.c) are financial intermediaries that lend funds and accept deposits.d) all of the above. 11. First national bank has assets of $900,000 and liabilities of $600,000. First NationalTrust’s owner’s equity is:a) $0.b) $300,000.c) $600,000.d) $900,000.12. A bank has reserves of $40, loans of $110, deposits of $90, and owners’ equity of$60. Which of the following represents the bank’s total assets?a) $180b) $110c) $130d) $150Table 14.1: FIRST COMMERCIAL BANKAsset Liabilities___________________$150,000 Total Reserves: $1,000,000 Deposits$100,000 Required Reserves $200,000 Net Worth? Excess Reserves? Loans$1,200,000 Total $1,200,000 Total________13. Refer to Table 13. 1. First Commercial bank’s excess reserves equal $__________.a) 150,000b) 250,000c) 100,000d) 50,00014. Refer to Table 13.1. First Commercial Bank’s total loans equal $______________.a) 1,050,000b) 1,200,000c) 1,150,000d)…
Which of the following factors pose a limit on the ability of commercial banks to increase the quantity of money in circulation by extending new loans? Select one or more: a. the quantity of Central Bank reserves that they own b. the quantity of money that savers lent to them by opening deposits c. the behavior of households and firms, which reduce the quantity of money in circulation by repaying previous loans. d. the availability of profitable lending opportunities in the economy e. the willingness of household and firms to take up new debts at the given interest rate