Assignment 3 (Ch. 3 & 5, LS 32 & 34)

The banking system in the United States is referred to as a fractional reserve bank system because

Reserves are an asset to commercial banks but a liability to the Federal Reserve Banks because

Excess reserves are equal to

“Whenever currency is deposited into a commercial bank, cash goes out of circulation and, as a result, the supply of money is reduced.”

Is this statement true or false?

Consider the following statement: “When a commercial bank makes loans, it creates money; when loans are repaid, money is destroyed.”

This statement is

Suppose that Mountain Star Bank discovers that its reserves will temporarily fall slightly below those legally required.

It can temporarily remedy this situation by

Assume Mountain Star Bank finds that its reserves will be substantially and permanently deficient. To remedy this situation, Mountain Star Bank can

Suppose that Serendipity Bank has excess reserves of $12,000 and checkable deposits of $200,000.
If the reserve ratio is 10 percent, what is the size of the bank's actual reserves? $

Suppose that Third National Bank has reserves of $10,000 and checkable deposits of $100,000. The reserve ratio is 10 percent. The bank now sells $20,000 in securities to the Federal Reserve Bank in its district, receiving a $20,000 increase in reserves in return.

Compound interest

Assume I is the the interest rate, t is the amount of years (time), and X is the is investment amount. What is the present value formula?

Suppose that you invest $100 today in a risk-free investment and let the 5 percent annual interest rate compound. Rounded to full dollars, what will be the value of your investment 5 years from now?