Q1. The following table shows the balance sheet for the Senators' Bank, which has a target reserve ratio of 8 percent.
|
Assets
|
Liabilities/Equity
|
|
Reserves
|
$2900
|
Demand deposits
|
$30000
|
|
Loans
|
26000
|
Shareholder's equity
|
5000
|
|
Securities
|
4200
|
|
|
|
Fixed Assets
|
1900
|
|
|
|
Totals
|
$35000
|
Totals
|
$35000
|
a) By how much is the Senators' Bank over- or under-reserved?
b) If the bank makes a loan in an amount equal to the excess reserves and the borrower writes a cheque (for the full amount of the loan) to another customer of the bank who then deposits it, what will be the new amount of excess reserves?
c) If instead, the cheque written by the borrower is cleared against the Senators' Bank (the cheque was written to a customer of another bank), what will now be the amount of excess reserves?
Q2. Answer the questions below based on the data in the following table. (All figures are in $billions.)
Total currency issued by the Bank of Canada - $45
Total personal savings deposits & personal term deposits - 270
Total demand deposits - 65
Deposits of the federal government at the Bank of Canada - 54
Currency held by the commercial banks - 8
Government bonds owned by the public - 165
Non-personal fixed-term deposits (certificates of deposit) - 105
a) What is the amount of currency in circulation?
b) How much larger is M1 than the amount of currency in circulation?
c) How much larger is M2 than M1?
d) How much larger is M3 than M2?