Please be sure to explain why and how to the questions -Thank you **T-Account Analysis for Educational Purposes****Balance Sheet**| Assets | Liabilities ||----------------------|-----------------|| Loans: $32,000 | Deposits: $40,000 || Required reserves: $2,000 | || Excess reserves: $6,000 | |**Questions:**a. **What is the required reserve ratio?**b. **What is the money multiplier?**c. **What happens to the monetary base right after the bank loans out all of their excess reserves (before they are deposited into a bank)?**d. **If the bank decides to loan out all of their excess reserves, by how much does the money supply change in total?****Explanation:**- The table presented is a T-Account which is used to summarize the financial position of a bank, specifically focused on its assets and liabilities. - On the **Assets** side, the bank records its loans ($32,000), required reserves ($2,000), and excess reserves ($6,000). - On the **Liabilities** side, the bank records its deposits ($40,000).In addressing the questions:a. **Required Reserve Ratio**: The required reserve ratio can be calculated by dividing the required reserves by the total deposits. b. **Money Multiplier**: The money multiplier is the inverse of the required reserve ratio.c. **Monetary Base After Loaning Excess Reserves**: This question explores the change in monetary base when the bank loans out its excess reserves.d. **Change in Money Supply**: To determine how much the money supply changes when the bank loans out all of its excess reserves, we consider the effect of the money multiplier.These concepts are fundamental in understanding how banks manage reserves and influence the money supply through lending activities.

Here, the given T-account shows information about deposits, loans, required reserves and excess…

8. Refer to the T-account below for the following questions. Assets Liabilities Loans $32,000 Deposits $40,000 Required reserves $2,000 Excess reserves $ 6,000 a. What is the required reserve ratio? b. What is the money multiplier? c. What happens to the monetary base right after the bank loans out all of their excess reserves (before they are deposited into a bank)? d. If the bank decides to loan out all of their excess reserves, by how much does the money supply change in total?

8. Refer to the T-account below for the following questions. Assets Liabilities Loans $32,000 Deposits $40,000 Required reserves $2,000 Excess reserves $ 6,000 a. What is the required reserve ratio? b. What is the money multiplier? c. What happens to the monetary base right after the bank loans out all of their excess reserves (before they are deposited into a bank)? d. If the bank decides to loan out all of their excess reserves, by how much does the money supply change in total?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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