Explain the role and importance of financial systems

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Reference no: EM133600267

Money and Banking

Introduction. Explain the role and importance of financial systems (direct and indirect finance) in boosting economic growth of developing countries.

Discussion. Address the following questions and cite references from books, journals, and websites as support to your discussions:

1- The last decade financial technologies (FinTech), known also as digital finance has grown exponentially bringing innovative financial services and product to peoples . Discuss the impact of this revolution on financial intermediation.

2- What are the main challenges faced by banks in the era of digitalization.

3- Discuss the evolution of payment systems by including the new forms of currencies (the bitcoin, blockchain Digital currencies).

4- Construct a map linking the outcomes from chapter 3 to chapter 6.

5- If the bank you own has no excess reserves and a sound customer comes in asking for a loan, should you automatically turn the customer down, explaining that you don't have any excess reserves to lend out? Why or why not? What options are available for you to provide the funds your customer needs?

Required: Develop an example for this case and use the T account to explain your answer.

6- "The Fed can perfectly control the amount of the monetary base but has less control over the composition of the monetary base." Is this statement true, false, or uncertain? Explain.

7- In chapter 5 we explain and demonstrate the simple model of deposit creation when the central bank purchases 100 $ of securities from the banking system.

Demonstrate what will happen when the CB sells 100 $ of securities to the banking system. Explain your answer using the T accounts and derive the model in this case.

8- Solve the following:

a- A bank has excess reserves of $6,000 and demand deposit liabilities of 100,000 when the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, calculate the bank's excess reserves?

b- If a bank has excess reserves of $15,000 and demand deposit liabilities of $80,000, and if the reserve requirement is 20 percent, calculate the bank total
Reserves.

c- Assume that no banks hold excess reserves, and the public holds no currency. If a bank sells a $100 security to the Fed, explain what happens to this bank and two additional steps in the deposit expansion process, assuming a 10% reserve requirement. How much do deposits and loans increase for the banking system when is the process completed?

d- If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000, and if the reserve requirement is 10 percent, then the bank has actual reserves of ......................?

9- Explain the quantity theory of demand for money.

Referencing. Cite reference in-text and in the list of references following APA 7th Edition.

Reference no: EM133600267

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