2. Kathy deposits $10,000 cash into her checking account at First Federal Bank. The required reserve ratio is 20 percent. (a) Calculate the maximum possible change in First Federal's loans as a result of Kathy's deposit. (b) After all adjustments in the banking system have occurred, calculate the maximum possible change in each of the following as a result of Kathy's deposit. (i) Demand deposits in the banking system (ii) The money supply (c) Draw a correctly labeled graph of the money market and show the effect of Kathy's deposit on the nominal interest rate. (d) Identify ONE reason that the change in the money supply could differ from the value calculated in part (b)(ii).
2. Kathy deposits $10,000 cash into her checking account at First Federal Bank. The required reserve ratio is 20 percent. (a) Calculate the maximum possible change in First Federal's loans as a result of Kathy's deposit. (b) After all adjustments in the banking system have occurred, calculate the maximum possible change in each of the following as a result of Kathy's deposit. (i) Demand deposits in the banking system (ii) The money supply (c) Draw a correctly labeled graph of the money market and show the effect of Kathy's deposit on the nominal interest rate. (d) Identify ONE reason that the change in the money supply could differ from the value calculated in part (b)(ii).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I'd like help on b,c,d
Transcribed Image Text:2. Kathy deposits $10,000 cash into her checking account at First Federal Bank. The required reserve ratio is
20 percent.
(a) Calculate the maximum possible change in First Federal's loans as a result of Kathy's deposit.
(b) After all adjustments in the banking system have occurred, calculate the maximum possible change in each
of the following as a result of Kathy's deposit.
(i) Demand deposits in the banking system
(ii) The money supply
(c) Draw a correctly labeled graph of the money market and show the effect of Kathy's deposit on the nominal
interest rate.
(d) Identify ONE reason that the change in the money supply could differ from the value calculated in
part (b)(ii).
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