Macro 2012 FRQ #2- Bank Balance Sheets

The video tutorial explains the concept of a bank balance sheet, detailing the assets and liabilities, and how they balance. It covers the reserve requirement set by the government and the impact of customer withdrawals on a bank's reserves and balance. The tutorial also discusses the effect of withdrawals on the total money supply and how banks manage excess reserves. Finally, it explains how banks can meet reserve requirements by borrowing from the central bank or other commercial banks.

What is the reserve requirement if a bank has $100,000 in deposits and holds $10,000 in required reserves?

• 10%

• 5%

• 20%

• 15%

If a customer withdraws $5,000, how does this affect the bank's reserves?

• Reserves increase by $5,000

• Reserves remain unchanged

• Reserves increase by $10,000

• Reserves decrease by $5,000

Why does a $5,000 withdrawal not initially affect the total money supply?

• Because the bank's assets increase

• Because the money is still within the banking system

• Because the bank's liabilities decrease

• Because the bank can print more money

What happens if a customer withdraws more money than the bank's excess reserves?

• The bank can ignore the reserve requirement

• The bank can print more money

• The bank must close down

• The bank can borrow from the central bank or other banks

What is the interest rate called that the central bank charges commercial banks?

• Federal funds rate

• Libor rate

• Discount rate

• Prime rate