Chapter 9: Q. 23 (page 264)
Axle Bank reported an ROE of and an ROA of . What is the equity multiplier? How well capitalized is this bank?
Equity Multiplier is
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Using the T-accounts of the First National Bank and the Second National Bank given in this chapter, describe what happens when Jane Brown writes a check for on her account at the First National Bank to pay her friend Joe Green, who in turn deposits the check in his account at the Second National Bank.
If no decent lending opportunity arises in the economy, and the central bank pays an interest rate on reserves that is similar to other low-risk investments, do you think banks will be willing to hold large amounts of excess reserves?
What happens to reserves at the First National Bank if one person withdraws of cash and another person depositsof cash? Use T-accounts to explain your answer.
Why might a bank be willing to borrow funds from other banks at a higher rate than the rate at which it can borrow from the Fed?
Why is being nosy a desirable trait for a banker?
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