. Working through a change in the reserve requirement ssume that the following table portrays the balance sheet of First Southern bank. Assets Vault Cash Deposits at Fed Loans Total $150,000 $250,000 $500,000 $900,000 Liabilities and Net Worth Deposits $900,000 Total $900,000
. Working through a change in the reserve requirement ssume that the following table portrays the balance sheet of First Southern bank. Assets Vault Cash Deposits at Fed Loans Total $150,000 $250,000 $500,000 $900,000 Liabilities and Net Worth Deposits $900,000 Total $900,000
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:8. Working through a change in the reserve requirement
Assume that the following table portrays the balance sheet of First Southern bank.
Assets
Vault Cash
Deposits at Fed
Loans
Total
$150,000
$250,000
$500,000
$900,000
Liabilities and Net Worth
First Southern's bank reserves are equal to $
checking deposits, First Southern' would maintain
reserves over and above the desired amount.
Deposits $900,000
The increase in the money supply will be
Total
I
$900,000
If First Southern uses the reserves above the desired level to extend additional loans, the money supply would increase by
$
If First Southern bank wanted to maintain 0.20 of its assets as reserves against
as reserves. Therefore, it would have $
as additional
If First Southern wanted to maintain 0.10 of its assets as reserves against checking deposits, First Southern' would maintain $
as reserves, additional reserves would be $
and the increase in the money supply would be $
if First Southern chooses a desired reserve ratio of 0.10.
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