Define the concepts of accounting

25%. The First National Bank is loaned up. Use a balance sheet for First National Bank to show the effect of a new deposit of $200 million. Assume there is no leakage from the banking system. What is the value of the money multiplier in Maldavia? By how much does the money supply increase in Maldavia?

11.              The required reserve ratio is 10%. Dollar Bank has $50,000 in deposits and $10,000 in reserves. Assume all other commercial banks are loaned up.

(a) What is the value of this bank’s excess reserves?

(b) What is the value of the additional loans that can be made by the commercial banking system?

(c) What is the money multiplier?

(d) By how many total deposits will be supported by Dollar Bank’s reserves, if this bank lends all its excess reserves and there is no leakage from the banking system?

12.              Suppose that a group of farmers form a cooperative in which they deposit all of their grain in a common warehouse elevator and are given a receipt for their deposits. After a period of time the manager of the cooperative notices that very few farmers are returning to the warehouse to redeem their grain. What do you suppose is going on here? Furthermore, suppose that someone who is not a member of the cooperative decided to borrow some grain but was willing to take a receipt instead of the grain. How is this example similar to the story in the text about the goldsmiths? What would happen if everyone returned to the cooperative to demand their grain all at once.

13.              Explain what bank runs are and why fear serves to reinforce them. Explain where the fear may originate.

14.              In terms of a bank’s or a company’s balance sheet what is meant by the statement that “the books always balance?”

15.              Explain each of the following accounting concepts: assets, liabilities and net worth.

16.              Define bank reserves.

17.              If the required reserve ratio is 20% and a bank has $1 million in demand deposits, how much reserves must the bank keep with the Federal Reserve Bank?

18.              Draw a T-account for a bank and write in the typical items that one would find on either