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a. Calculate the dollar value of the reserves that the Bank of Uchenna is required to hold. b. Given the current reserves, calculate the maximum value of additional loans that the Bank of Uchenna can make. c. Assume that Elike raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of Uchenna. By how much does the money supply immediately change as a result of Elike's deposiť?

a. Calculate the dollar value of the reserves that the Bank of Uchenna is required to hold. b. Given the current reserves, calculate the maximum value of additional loans that the Bank of Uchenna can make. c. Assume that Elike raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of Uchenna. By how much does the money supply immediately change as a result of Elike's deposiť?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answer. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. The Bank of Uchenna has the following balance sheet. Assets Liabilities and Equity S30,000 Demand deposits S70,000 Reserves $100,000 Loans Property $2,000 Equity (net worth) $2,000 Assume that the reserve requirement ratio is 20 percent. a. Calculate the dollar value of the reserves that the Bank of Uchenna is required to hold. b. Given the current reserves, calculate the maximum value of additional loans that the Bank of Uchenna can make. c. Assume that Elike raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of Uchenna. By how much does the money supply immediately change as a result of Elike's deposiť? d. Calculate the maximum change in demand deposits in the banking system as a whole resulting from Elike's deposit. e. If the Bank of Uchenna is not meeting its reserve requirement, what action can it take to meet the reserve requirement without calling in loans or selling property? O Please respond on separate paper, following directions from your teacher.
Transcribed Image Text:1. In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answer. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. The Bank of Uchenna has the following balance sheet. Assets Liabilities and Equity S30,000 Demand deposits S70,000 Reserves $100,000 Loans Property $2,000 Equity (net worth) $2,000 Assume that the reserve requirement ratio is 20 percent. a. Calculate the dollar value of the reserves that the Bank of Uchenna is required to hold. b. Given the current reserves, calculate the maximum value of additional loans that the Bank of Uchenna can make. c. Assume that Elike raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of Uchenna. By how much does the money supply immediately change as a result of Elike's deposiť? d. Calculate the maximum change in demand deposits in the banking system as a whole resulting from Elike's deposit. e. If the Bank of Uchenna is not meeting its reserve requirement, what action can it take to meet the reserve requirement without calling in loans or selling property? O Please respond on separate paper, following directions from your teacher.
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