a) Suppose that the bank has the following balance sheet. Answer the following questions: Assets Liabilities Reserves: Deposits: $500 Loans: i) If the bank keep all money as reserve, fill in the T-account. What is the change in money supply? ii) Suppose that Central bank's reserve requirement is 20 percent of deposits What is the maximum amount that money supply could increase by the banking system? b) The banking system currently has $300 billion of reserves, none of which are excess People hold only deposits and no currency, and the reserve requirement is 20 percent if the Central bank reduces the reserve requirement to 15 percent, then by how much does the money supply change?

a) Suppose that the bank has the following balance sheet. Answer the following questions: Assets Liabilities Reserves: Deposits: $500 Loans: i) If the bank keep all money as reserve, fill in the T-account. What is the change in money supply? ii) Suppose that Central bank's reserve requirement is 20 percent of deposits What is the maximum amount that money supply could increase by the banking system? b) The banking system currently has $300 billion of reserves, none of which are excess People hold only deposits and no currency, and the reserve requirement is 20 percent if the Central bank reduces the reserve requirement to 15 percent, then by how much does the money supply change?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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